How to Fit Insurance Into Your Budget

Most people all have times when they need to adjust their budgets and look for areas where they can trim spending, but which items can be removed or reduced? If you’re reviewing your budget, you might start to consider whether or not your insurance premiums are worth the cost. You may be asking yourself — are those monthly life, disability and renter’s insurance premiums really necessary?

The truth is, your insurance premiums are in a different category than your other recurring monthly bills. That’s because they aren’t buying you a tangible item, like an iPhone, a meal from UberEats, or a service like Netflix or Spotify. Instead, your premiums are paying for insurance coverage that’s helping to protect your money — whether it’s your future income or the cost of replacing your possessions from the impact of unlikely, but financially devastating events. This is why you should think twice before dropping insurance coverage from your budget.

Why Should You Budget for Insurance?

The protection insurance provides can be an important part of your overall financial plan and security. For example, if your family relies on your income to pay bills and save towards future goals, life would change dramatically if your income suddenly disappeared. That might be because you get badly injured or become very ill and can no longer work, or — in the worst-case scenario — if you pass away unexpectedly.

So while it may seem like you aren’t “getting anything” in exchange for paying your monthly insurance premiums, what you are in fact doing is transferring the cost of a potential loss to your insurance company. This way, if an unforeseen event disrupts your life and threatens your finances, the payment from your insurance claim can help offset its effects.

What’s The Chance You’ll Need Your Insurance Coverage?

Incidents requiring insurance protection happen more often than one may think. For example, based on a report from the Council for Disability Awareness, the average 20-year-old has a greater than 25 per cent chance of becoming disabled before they retire. And the Canadian Red Cross says that home fires are one of the most common emergencies faced by Canadians.

At times people may choose to manage the financial loss themselves, but that may not be a possible option. Insurance can help provide coverage in case of a sudden and unexpected loss, damage, illness, injury or death. While people don’t want to think about negative things happening to them, it’s important to ask yourself if you’re prepared to manage a loss financially if something does go wrong.

Where Does Insurance Fit In Your Budget?

Insurance is an important tool to have because it can help you mitigate a potential financial loss due to an unexpected event. Here are some steps to help you determine how insurance can continue to fit into your budget.

Step 1: Identify insurance costs in your budget

Highlight every insurance premium separately when reviewing or creating a budget. This helps you see how much each type of insurance—life, disability, renter’s, auto—contributes to your total monthly expenses and ensures you’re not overlooking essential coverage.

Step 2: Review your coverage and identify savings

Write down the coverage amounts those premiums are paying for. You should be aware that there might be ways to trim the cost of your insurance, without cutting it out of your budget entirely.

• For example, with disability insurance, you could increase the waiting period before your policy pays out if you become disabled, which may lower the cost of your monthly insurance payments.

• For life insurance, you could check to see if you have the right amount of insurance — is there an opportunity to reduce the death benefit amount while still being covered for your family’s needs?

• With renter’s insurance you control the dollar amount you are covered for and the deductible you choose to pay, should something happen.

• For car insurance, with the exception of a leased or financed vehicle, you can choose whether you have coverage for loss or damage to your own vehicle or if you’re only covered for the mandatory third-party liability.

Step 3: Adjust your budget to fit essential coverage

Prioritize which changes you are comfortable making based on what makes sense for your current situation. Remember you can always discuss this with a licensed insurance advisor and have them review your policy with you to see what changes can be made to help with your payment amounts.

Keep Insurance as a Fixed Expense in Your Budget

All in all, insurance should be a part of the plans you make for your finances, beyond your day-to-day budget. That means you should understand what you’re getting in exchange for your monthly premium payments, and you should feel confident you have the coverage that’s right for you.

An RBC Insurance advisor can help you understand what kinds and amounts of insurance are right for you — and how to fit them into your overall budget.

Frequently Asked Questions (FAQs) about How to Budget for Insurance

What should I include in my budget?

A balanced budget should cover your essential living costs, financial goals, and protection needs. Include housing, utilities, food, transportation, insurance, debt payments, savings, and discretionary spending.

How much should you spend on insurance?

Many financial experts recommend allocating around 5–10% of your income to insurance, though the right amount depends on your lifestyle, family size, and existing coverage. For example, a single person may only need basic health and renter’s insurance, while families often need higher life, disability, and property coverage. The key is to ensure your premiums fit your current income level without leaving major financial risks unprotected.

Where should insurance appear in a budget?

Insurance should be listed under fixed monthly expenses, alongside rent or mortgage payments and utilities. Treating it as a non-negotiable item helps you maintain consistent protection even when adjusting other spending. When reviewing your budget, note each policy’s cost and coverage level so you can identify potential savings, such as bundling policies or adjusting deductibles, without removing essential protection.

What percentage of budget is insurance?

Most financial experts suggest allocating between 5% and 10% of your total income to insurance. This includes health, life, home, auto, and other types of coverage. The exact percentage depends on your personal situation, such as income level, family size, and existing protection. Families with dependents or mortgages often need to budget closer to 10%, while single individuals with fewer obligations may spend less.

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