Before you can determine which insurance products you need, you must set a budget. How much can you afford to spend on insurance needs? It is important to be cost-effective in your insurance planning. Insurance is a long-term product, and certain insurance products have higher premiums than others; therefore, it makes no sense to begin an insurance program that you cannot continue. As you think about your goals and insurance needs, recognize the potential for change in your income—or even the potential for loss of income—and the likely impact that these changes would have on your budget. 

On the other hand, you face risks that are beyond your control. You will face financial responsibility if certain adverse events occur. In making insurance decisions it is also important to purchase all insurance that is necessary to allow you to survive the foreseeable adverse events of life. If your current consumption does not leave enough money in the budget to purchase insurance that should be in place, then it may be necessary to reevaluate priorities.