Cheap insurance may end up costing you more in the long run if it turns out not to fully cover you for what life might throw at you. It could certainly prove not to be part of your frugal budgeting plan in the long run.
I have heard of many stories where people have been paying into insurance policies for years and years only to discover that when they actually need them, they are unable to make a claim.
This has been especially true for critical illness mortgage cover insurance, where loopholes in the policy may mean that not all illness are covered.
As part of your frugal budgeting you should always consider building in some protection for you and your family.
Life has a funny way of throwing unexpected curve balls and if you are not prepared can cost you an awful lot more money, let alone distress than paying out a little every month for the policy.
I will hold my hand up and say that I used to think that insurance was a waste of money, but over recent years I have had experience of occasions where I really did need my insurance cover.
A little saying I have heard is
“Expect the best and prepare for the worst”.
I think is a very good motto to keep in mind when sorting out your money priorities and so if possible build in some insurance policies into your frugal budgeting plan.
What insurance do I need?
So how to decide what insurances you should go for? There are two main things to take into consideration:
- How much you can afford to pay out each month.
- What would be the effect on you if anything happened and you were not covered?
With these two things in your mind, draw up a simple list of:
- What insurances you would like
- Put them in order of importance i.e. what effect would it have on you if something happened and you were not covered.
- Know what you can afford in your budget every month.
Now you can focus on what are the most important insurances for you and if you can afford them. It may be that you realise they are so important to have that you will rearrange your finances to include this monthly cost.
Cheap Insurance or Premium insurance?
Ok, so I have said that cheap insurance may not be the best option but sometimes it could be.
The secret is to read the small print and know exactly what you need to be covered for. With these two rules, buying inexpensive insurance policies may save you some big bucks and can easily fit into your frugal budgeting plans.
There are also ways to cut the cost and be frugal, therefore making cheap insurance a reality.
Shop around – always do some legwork when looking for cheap insurance. Taking the first option or insurance as part of a package may be a costly mistake.
The easiest option these days is to use online comparison sites, which will give you a quick idea of the costs involved. However, don’t be afraid to ask friends and family, they may have just come across a bargain themselves.
Don’t double up – This can often occur when buying holiday insurance.
For instance, some package holidays include baggage insurance as part of the holiday, so why pay for it again.
Instead ask for specific cover, excluding unnecessary items and so reducing the cost.
Pay insurance premiums annually if you can rather than monthly. This way you will pay less and that cheap insurance suddenly makes even more sense.
If you budget for this in your yearly plan, then you will have it saved up in time for payment every year.
Buy insurance separately and not as part of a package. Often you will be paying more for insurance included with something else.
A good example of this is holiday insurance; if you buy the insurance offered with your package it can cost you up to four times as much than if you had bought it separately.
At the end of the day whether buying cheap insurance or premium insurance it boils down to the fact that you have made a conscious decision to use your money to help protect you from some of life’s unforeseen events that you know will effect your life the most.
So don’t feel pressured into buying insurance just because others have. Assess your life needs and make an informed, frugal and honest decision that will provide protection and will fit in with your frugal budgeting plan.