Your budget should be a major consideration area in any insurance purchase. After all, comfortably paying life insurance premiums should be a given, at least ideally. Follow along to learn more about this essential item.
Your (Insurance) Budget
Looking at the title of this article, you may immediately think of your overall budget. However, as life insurance premiums wouldn’t necessarily take up a huge chunk in most budgets, that isn’t the important part – you must have a budget for all insurance products.
Think about what would happen if you didn’t. If you were to purchase a great life insurance policy, that could have a negative impact on your other insurance products: your insurance portfolio, once added up, would be a little bit too heavy for your overall budget.
Don’t get into this downward spiral. If you don’t consider the right portion to allocate to life insurance, you might be out of luck when you arrive at a bigger insurance need (in price), such as your homeowners or car policy.
A Matter of Comfort
Once you start looking at your insurance premiums in your budget, as well as your overall budget, you should be able to come up with a figure that might be reasonable.
Before you compare life insurance rates, you might want to look into the actual numbers to get a sense for what is “normal.” Yes, you read that correctly: compare life insurance rates before actually comparing the life insurance quotes and policies (seriously). You will need to get an accurate range of prices based on coverage and the type of policy that you are considering.
Once you get these numbers, you can take an involved look at your insurance budget and overall financial situation.
Balancing Affordability and Coverage
While we won’t get into figuring out how much coverage you need, you will certainly have to take that into consideration. With that said, you will need to balance the amount of coverage needed with what you can afford.
Take these things in stride to come up with an affordable range. For instance, if you can take on a $250,000 policy by locking in low rates for your age with whole life insurance, you can then see if that is a good coverage amount for your needs. And if it works in your budget, now might be the time to go ahead, after considering other items (such as bundling as present in another article in this series).
Once you find out this comfortable area, everything else will come a little easier. You can then gauge what types of policies you can afford. If you can’t afford the coverage amount that you need, you’ll have to go back to the drawing board or come up with another strategy (i.e. term life insurance for now, and/or save up for it).
Be sure to take a close look at your insurance portfolio budget as well as your normal budget. As these items come together, they will decide what you can or cannot reasonably afford.
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