Chapter 5. How to forecast an insurance budget?

As your insurance needs change, they directly affect the cost associated with each type of insurance you will need in your life to protect you, your family, and your assets. This fluidity makes it difficult to anticipate and fully plan for risk management in life. You have to rely on common sense as it applies to your unique situation. As a general rule, forecasting an insurance budget uses actual cost over the years modified by changes in each individual's life.

 

How to

Here are the steps to forecast an insurance budget as close to real life events as possible:

  1. List all of your current insurances and indicate the type and cost for each as a starting point.
  2. Prepare columns by increments of 10 years, using your current age as a starting point. For example, if you are now 30 years of age, columns will be (40, 50, 60, 70, etc.).
  3. Project your goals for each by adjusting, deleting, and adding insurance needs for each column. For example, when the children are grown up and are no longer on your medical plan, your health insurance premium will go down, but you will need to plan for long-term medical care as you approach retirement age.
  4. Assign a dollar amount cost for each forecasted insurance need.
  5. Review for governmental assistance as applicable for each age bracket and explore other private options.
  6. Calculate an average for your insurance budget needs for each decade of your life.

 

 

This quick exercise will help you to factor in your future needs to your current budget, thus remaining protected and insured.

 

Practice

Now that you know how to estimate your future insurance needs and how to forecast a budget, think of paying it forward and discuss life's changes that affect your insurance planning with a friend or a family member.

 

Congratulations! Now Test your knowledge about Insurance planning!

Would you like to review again? You can start over at Introduction.

To review the full module on Insurance planning, click here.

 

The Penn State Sokolov-Miller Family Financial and Life Skills Center hopes you have enjoyed this module in the MoneyCounts: A Penn State Financial Literacy Series. Please tell us how we can serve you better, leave us a feedback, ask a question, or request additional information at: finlit@psu.edu