If you want to ensure you and your family are adequately covered against potential risks but still want to keep a reasonable budget amid the tight economic conditions we’re experiencing, you need to plan carefully.
Here are some thoughts on budgeting for insurance in the current turbulent times:
The Price of Peace of Mind
Life is fraught with risks. Every time you get in your car, for example, you run the risk of getting into an accident.
Covering these risks with insurance, however, comes at a price and the premium you pay for should add a peace of mind. Therefore, it is savvy to prioritise the risks that are most worth covering according to: the likelihood of them occurring; and the cost you’d incur if they were not covered.
In other words, you need to ask yourself: What coverage do I need to give me maximum peace of mind?
To answer that, you need to consider the most common types of insurance available on the market, which you should list in order of importance for you personally:
- Legal insurance
- Funeral insurance
- Health insurance
- Car insurance
- Home insurance
- Life insurance
- Disability insurance
- Travel insurance
- Business insurance
Within each of these broad categories are varying degrees of coverage, which you should weigh up carefully using the two risk criteria listed above.
Allocating the Right Proportions
When working out your insurance expenses, it is important to understand the kinds of proportions that are generally accepted so that you can determine whether what you’re paying is reasonable or not.
Health insurance or medical aid is oftentimes the biggest insurance expense for most families. Thereafter come things like car insurance and home insurance.
The general rule of thumb is that your insurance costs, in total, shouldn’t chew up more than about 15% of your overall monthly budget.
If you aim to spend exactly 15% of your income on insurance, you might allocate it along these lines:
- Medical insurance: 5% to 7%
- Car insurance: 2% to 4%
- Home insurance: 1% to 3%
- Life, legal, and funeral insurance: 2% to 3%
At Workerslife, we offer funeral, life, and legal insurance solutions that won’t break your budget. Contact us now to get comprehensive coverage the affordable way!