CHAPTER TWELVE
You’ve learned how to use insurance to protect some of your most important assets—your car, smartphone, and furniture. But there is one asset that cannot be replaced: YOU. Your ability to work. Your identity. Your life.
There are some tools for protection that may not even register on your radar screen. You probably figure that you’re just a teen and life isn’t complicated enough to have a will or life insurance. Let’s see if that assumption is correct.
A will is a legal document that sets up what you’d like to happen to your property when you die. While most teens’ financial lives are pretty uncomplicated, a will is a good idea if you feel strongly about which of your siblings would get your dirt bike or jewelry, or if you have a beloved pet that would need a new home. If you do have assets, either from saving or by inheriting money or property from a relative, having a will is even more important. A will is an absolute must if you have a partner or children. A will establishes guardianship—who will take care of your child if you die. You don’t want to leave that decision up to the court system.
You can use legal websites or computer software to create a simple will. If you’d rather get professional help, start with your parents’ or guardians’ lawyer, if they have one. Some law firms also do free legal work for certain groups, including teens. Legal aid groups, which are made up of lawyers who volunteer their time to help low-income people with legal problems, are another option.
If you’re an average teen, the answer is no. Life insurance is designed to provide financially for your loved ones when you die. It’s typically used to replace the income earned by the person who died and to cover large expenses such as the cost of college for the person’s children.
Teens typically don’t have children or large incomes to replace. If you do work and have a family, you might consider a term life insurance policy. It covers the policyholder for a certain period of time, such as 10, 20, or 30 years, rather than the policyholder’s entire life. If the policyholder dies during the time the policy is in effect—the term—the beneficiaries receive a payout. Term insurance premiums are generally lower than whole life insurance premiums.
If you don’t have a family to support, there are better places to put your money. The only caution is that term life insurance policies tend to cost less the younger and healthier you are. But waiting until you’re in your 20s or 30s won’t mean a drastic increase in the premium.
Insurance salespeople may try to sell you a policy that has cash value as a way to protect your family and as an investment. Don’t bite. These policies are expensive, and it can be tough to find room in your budget for the monthly premiums. There are better tools for investing in your future. Plus many employers offer a term life insurance policy worth one to two times your annual salary as an employee benefit. That may be enough.
Disability insurance replaces a portion of your income if you can’t work for a few weeks because of a temporary condition, or if you have a chronic illness that keeps you from earning money for a long period of time. Sometimes disability insurance is included as an employee benefit. Your employer may pay for part or all of a policy or offer it as a benefit you can pay for yourself. Insurance agents also sell disability insurance policies.
According to a survey by Learnvest, an online personal finance company, and Guardian Life Insurance Company, just 35 percent of 20- and 30-somethings have disability insurance of any kind. Most report that they don’t know anyone who has become disabled or they don’t think they need it for the kind of work that they do.
You might agree with the young adults who responded to the survey. You are young and healthy and don’t need to scrape together money in your budget to buy insurance that covers you in the rare case that you become disabled. But it’s more common for a young person to become disabled than you think. The U.S. Social Security Administration says that one in four of today’s 20-year-olds will become disabled sometime during their careers.
Social Security offers disability insurance to workers who have paid into the system. But that usually isn’t an adequate amount of coverage for workers and doesn’t help in the event of a shorter-term illness or injury.
Someone’s identity is stolen every three seconds, according to research company Javelin Strategy and Research. This amounts to 12 million identity fraud victims in the United States a year.
Young people are attractive targets for thieves because they are looking for clean identities—people with few, if any, blemishes on their credit reports. A credit report is a record of your financial accounts. Financial institutions and others consult it to decide whether to lend you money, accept your credit card application, or rent you an apartment.
Have you ever shared a computer password or PIN with a friend? Or recycled bank account documents without shredding them? These actions may seem harmless enough. Your friend isn’t going to do anything to hurt you. And who is going to dig through your recycling bin? But both are actions that can lead to identity theft.
Identity theft occurs when someone uses your personal information for his or her benefit. It could mean someone else using your Social Security number to apply for a job or opening a credit card account in your name. Getting personal information that can be used to steal your identity is easier than you think. Personal information could be stolen onlne, from your trash or recycling bin, or from forms you might have on file at school or a doctor’s office.
If your identity is stolen, it can take dozens of hours and a lot of hard work to clean up the mess. So how can you protect yourself from this crime? Nothing is foolproof, but following some simple precautions can greatly reduce your chance of becoming an identity theft victim.
Identity thieves can thwart even the most careful consumer. If you discover that your identity has been stolen, immediately take these steps to prevent further damage:
Experts suggest a different password for every account to avoid problems in case one of them experiences a security breach. Having to remember dozens of complex passwords is tough, especially since writing them down carries its own risks. But you don’t want to be the chump who uses “password,” “123456,” or another easy-to-guess and all-too-common password to access your bank account.
Wondering how to create foolproof passwords that you can remember? Here are some suggestions:
After following these tips, if you still wonder how your password stacks up, run it through an online password checker, such as Microsoft Safety and Security Center, https://www.microsoft.com/security/pc-security/password-checker.aspx.
Resolving identity theft issues is time-consuming. According to Javelin Strategy and Research, identity theft victims spend about 58 hours trying to repair damage to their existing accounts and 165 hours fixing the damage caused by new accounts fraudulently opened in their names. That’s the equivalent of more than five 40-hour workweeks!