Financial preparedness is essential in today’s unpredictable world. For millennials, balancing financial responsibilities with unexpected costs, such as those stemming from a car accident, can be challenging.

By building up a few smart habits, though, you can ease the financial stress of unforeseen events and make insurance claims a much more manageable process.

Here are five practical financial habits that can reduce stress while claiming insurance:

1. Build an Emergency Fund for Insurance-related Costs

An emergency fund is a financial buffer designed to cover unexpected expenses and is something all millennials should have. This critical tool will help you to avoid financial stress during an emergency such as a car accident. In most cases, car insurance will cover a significant portion of accident-related expenses, but it may not cover everything.

After all, the difference between no-fault and at-fault states might mean you’re on the hook to pay more. Costs like deductibles, rental cars, and even medical expenses may need to come out of pocket which makes an emergency fund essential.

Aim to save at least $500-$1,000 for emergency expenses related to insurance claims. This will not be an overnight process, so try to set up an automatic transfer of a small amount each week or month to your account. Over time, you’ll be able to build up a fund that can be accessed in a pinch.

2. Automate Your Personal Record-Keeping Strategies

Having organized and accessible documentation can simplify the claims process and save you time and stress. Maintaining records such as your insurance policies, recent receipts for any vehicle maintenance, repair records, and even past claims documentation can streamline the entire process if you submit a new claim.

Automate this habit by using apps that store and organize documents such as Google Drive or Dropbox where you can scan and save important documents directly from your smartphone.

Some apps, such as Expensify or Evernote, even allow you to categorize and tag your documents by type which can make it easier to locate receipts or forms when needed. Another bonus tip is to set up reminders for insurance renewals and maintenance appointments to stay on top of your records and save valuable time.

3. Regularly Review and Adjust Your Insurance Coverage

Life changes quickly, especially for millennials who are in a stage of life where moving, career changes, and major purchases are all common. It’s essential that you review your insurance coverage regularly to ensure it still meets your needs.

Whether you’ve just bought a new car, moved to a new city, or simply changed your driving habits, these shifts can impact your insurance needs and possibly even your premiums. In fact, it’s recommended to review your existing insurance policy at least once a year to determine whether or not your current policy is adequate.

Set a calendar reminder to specifically review your insurance policies at least once a year and take a close look at your coverage limits and deductibles so that you can make adjustments as necessary for your insurance claims.

If you’ve moved to a location with a lower risk of accidents, as an example, then you may qualify for a reduction in your premiums. Along the same line of thinking, if your driving habits have changed significantly then you may want to adjust your liability coverage to match your current lifestyle to avoid overpaying.

4. Understand and Improve Your Credit Score

Many people are unaware that their credit score can directly influence their car insurance premiums. Insurers in many states will use credit scores to assess risk and having a stronger credit score can result in lower insurance rates.

By building and maintaining a good credit score, you can therefore also build a valuable financial habit to keep your insurance costs manageable.

To improve your credit score over time, focus on things such as paying bills on time, reducing credit card balances, and limiting new credit applications. There are also free tools you can use such as Credit Karma that allow you to monitor your score and receive tips on how to improve it.

Even a small improvement in your credit score can positively impact your insurance premiums and lead to long-term savings, not only saving you money on insurance but also positioning you better for loan and credit card terms in the future.

5. Educate Yourself on Deductibles and Policy Terms

By understanding how deductibles and policy terms work, you can successfully manage a simple yet powerful way of reducing insurance-related stress.

Higher deductibles typically mean lower premiums but result in higher out-of-pocket expenses when filing a claim. On the other hand, a low deductible will lead to higher premiums but minimize immediate costs if an accident does occur.

When choosing or reviewing a policy, consider your budget and personal risk tolerance. If you have a robust emergency fund, for example, a higher deductible might save you money on monthly premiums.

However, if you’d prefer to avoid significant out-of-pocket costs if an emergency happens, a lower deductible might be more beneficial. Knowing your coverage inside and out can help you feel more secure and avoid costly surprises during the claiming insurance process.

Habits for Millennials to Manage Insurance Claims with Ease

Adopting the above five habits will go a long way in helping you as a millennial manage the stress of claiming insurance.

Building an emergency fund, keeping organized records, regularly reviewing your coverage, improving credit scores, and understanding deductibles are practical steps that can help you reduce financial strain if you need to submit an insurance claim.

By simply incorporating these habits into daily life you can be better prepared for the unexpected and able to handle insurance-related expenses with greater ease and confidence. Don’t settle for being shocked by the out-of-pocket demands of an auto insurance claim when you can simply stay on top of everything yourself.