Affordable Insurance: What You Need to Know to Budget for Any Type of Insurance
Affordable insurance is available for every type of insurance that you might need in your life. However, you have to do some research to be able to get it. More importantly, you need to do some serious thinking about what’s right for you. After all, what’s affordable insurance for one individual or family could be completely out of reach for another.
What Is Affordable Insurance?
Affordable insurance generally meets the following requirements:
- It covers at least the minimum of your required insurance needs.
- You take your household income into careful consideration.
- If it’s appropriate, you add additional insurance beyond the minimum.
- You shop around for the best costs available to meet your needs.
For example, if you’re a driver, then auto insurance is required. However, you typically only need minimum coverage. However, you have to take into consideration your income, the value of your vehicle, and the likelihood of needing to utilize your insurance. Weighing those factors, you might determine that in your case, you need full coverage. Therefore, you shop around for the best full coverage auto insurance available to you.
Likewise, most people don’t consider life insurance a priority. Therefore, in the overall scheme of affordable insurance options, you won’t likely choose to sign up for it. However, if you have dependents who rely on you for your income and/or you are at high risk of early death, then you might determine that this type of insurance is necessary. If so, then you would shop around to find the best option.
What Type of Insurance Do You Need?
The first step in determining what’s affordable insurance for you is to figure out what types of insurance you actually need. There are three types of insurance that are mandatory for many people. First, if you drive a car, then auto insurance is mandatory. Second, if you have a home mortgage, then home insurance is likely mandatory. Finally, health insurance was mandatory under The Affordable Care Act. While there are no longer penalties for not having health insurance, most people agree that the risks of not having this insurance outweigh the benefits, so it’s widely still considered a requirement by most people.
Therefore, if you own a home and a car, then your minimum insurance requirements will be for home, auto, and health insurance. In a moment, we’ll look in more depth at affordable insurance for these three key areas of life. However, you should also review other common types of insurance, which you may need depending on your unique situation. Common types of insurance people often get include:
- Dental insurance if your health insurance doesn’t cover this
- Disability insurance in case you become unable to work
- Insurance specific to the type of business that you own
- Liability insurance to protect you from lawsuits
- Life insurance for your beneficiaries
- Natural disaster insurance to supplement your home insurance
- Renter’s insurance if you do not own your home
- Pet health insurance if you have pets in your own home
- Property insurance to cover the extras that your renter’s insurance or home insurance excludes
Review Your Household Income
In order to determine which insurance you need, you will have to take a look at your household income and budget. How much do you make? When budgeting, what percentage of your income can you afford to let go to insurance payments? People generally dedicate between 2% and 10% of their income to insurance payments.
If you have a high-risk lifestyle that requires a lot of insurance, then you might be on the high end. If you are young, healthy, and don’t own a house or car, then you might be on the low end. In general, it’s best to try to stay within the 3%-5% range when you budget for insurance.
Therefore, you should calculate what that range is for your particular income. For example, if you take home $5000 per month, then your monthly budget for insurance payments is between $150 and $250. That’s the amount that should be affordable insurance for you.
First, you’ll start with the basics. You’ll search for the most affordable health, home, and auto insurance. Then, if there’s any room left in your budget, you can start adding on further types of insurance.
How to Get the Most Affordable Insurance
Once you know the types of insurance that you plan to get, then it’s time to shop around to get the most affordable insurance in each category. Some people choose to get all of their insurance from the same company. Often, this is the most convenient option. It can also be the most affordable. However, as you do your research, you should compare the costs of working with different companies for each type of insurance as well. It requires a bit more time to figure out the details but can be well worth the money saved.
When you figure out your income, it’s not just in order to set your budget. It’s also to help you find out what you qualify for in terms of programs for affordable insurance. You might qualify for Medicare, Medicaid, or aid for families with children. You might also qualify for subsidies, price-adjusted plans, and other income-based cost reductions. Look at these first when trying to get affordable health insurance.
Beyond that, you can look at a variety of different ways to obtain health insurance including:
- Employer-supported health insurance plans
- Catastrophic or “emergency only” health insurance
- Opting for a high-deductible plan
- Staying on your parent’s plan until age 26
- Opening a Health Savings Account
Health insurance is a complicated topic, and the rules seem to keep changing as the government changes. Therefore, it’s important to do your research. You have to choose the minimum coverage that your unique situation requires, which varies from person to person. Work with a professional to help you make the best choices when it comes to affordable insurance for health care. After all, your health is a life priority.
If you have a mortgage on your home, then there’s most likely a requirement that you carry homeowner’s insurance. First, find out what’s required of you. With that in mind, here are some additional tips:
- Insure what it would cost to rebuild the home, not to rebuy it.
- Get rid of risky things that drive up costs, such as trampolines and wood stoves.
- Add safety features such as smoke detectors.
- Make repairs to reduce costs. In particular, make sure the roof is up to date.
- See if you qualify for discounts, for example, if you’re a senior homeowner.
When it comes to your car insurance, many factors determine how much you’re going to pay. Your age, driving record, and the type of car that you own all come into play. As you look into affordable health insurance, you might actually determine that your best option is to get rid of your car. You could go car-free entirely, saving money in many ways.
Alternatively, you could trade down for an older model that you can buy outright. If you are still paying your car loan, you might be required to carry full coverage. On the other hand, if you own the car, you can opt for minimum coverage. Furthermore, an older car will likely have cheaper coverage options.
Whether or not you change your vehicle, here are some tips to get the most affordable insurance for your car:
- Shop around with an eye towards what small, local insurance providers can offer.
- Ask about discounts such as military discounts and good driver discounts.
- If you don’t drive often, look into pay-per-mile insurance rates.
- Pay a higher deductible in order to reduce the cost of monthly payments.
Additional Tips for Choosing the Most Affordable Insurance
In summary, if you want affordable insurance, then you first have to determine what you minimally need and what budget is affordable for you. Then you need to shop around to get the best deal for each type of insurance that you require, making sure to stay within your budget. Here are some additional tips for choosing the most affordable insurance:
- Maintain a good credit score and a good insurance score.
- Review your rates annually, but be aware that staying with the same company over time can save money.
- Make the most of every possible discount available to you. A few include AARP and AAA memberships.
- Compare government insurance with private insurance.
- Don’t be afraid to go with a smaller local company if they can meet your needs.
- Select a higher deductible when that makes sense for you.
- Make all payments on time. See if you get a discount for paying a full year in advance.
- Know your goals and requirements. Make sure your choices are in line with them.
Finally, ask your insurance provider what discounts they offer. For example, you might get discounts for making safety updates to your home and car or even for switching to online-only bill statements. If you don’t know about these discounts, then you won’t take advantage of them as you search for affordable insurance.
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