Why It’s Important to Include Insurance in Your Financial Plan

As you work to become financially stable and build wealth, it’s important to make sure your assets are protected against unforeseen events.

Accidents and disasters do happen, and if you aren’t adequately insured, you could end up suffering a significant financial loss.

While insurance planning is not as direct a way of saving as investing, it can actually save you a significant amount of money over the long haul. You might want to think of it as a precautionary investment that can protect you from a major financial loss.

Insurance requires an upfront investment in the form of annual or monthly premiums. That’s why it’s important to consider what insurance you may need (and how much it will cost) when making a financial plan, since it can affect your overall budget.

Read on to learn why insurance is important, what kind you may need, and how to make paying for it feel manageable.

The Purpose of Insurance and How it Works

Insurance is a tool that helps you manage risk in a variety of areas. An insurance policy is essentially an agreement between you and the insurer that you will have some level of financial protection in the event something “bad” happens.

Life insurance can also be important if you have a family who is dependent upon you financially. If you are married and your spouse contributes to the household, either financially or by caring for children and/or handing other responsibilities, your spouse may also want to consider buying life insurance.

Renters and disability insurance can also be smart ways to hedge your bets against an unforeseen, and potentially costly, event.

As your financial and other life circumstances change, so will your insurance needs. That’s why it can be a good idea to sit down at least once a year and reevaluate your insurance coverage and consider whether or not you are adequately protected.

How to Build Insurance Into Your Financial Plan

Financial planning may sound fancy. But coming up with a basic financial plan simply involves thinking about your goals–both short term (such as having an emergency fund, paying off debt, or buying a car) and long term (like funding your retirement, saving for a child’s college education, or paying off your mortgage).

You can then assess your income and current expenses and create a monthly budget that helps you work towards your financial goals.

50/30/20 plan. This allocates 50 percent of your income to essential/fixed expenses, 30 percent on discretionary expenses, and 20 percent towards savings goals.

When you tally up your essential, or fixed, expenses, here’s where you’ll want to include insurance. If an insurance premium is charged annually, you can divide it by 12 (or, if it’s biannual, divide by 6) to make sure you’re allocating enough money in your monthly budget to cover this expense.

The Takeaway

While the upfront expense of insurance may be something no one wants to pay, it can be well worth the investment by protecting you from unexpected financial losses.

Having a financial plan (and an emergency fund) in place can also provide protection against the unexpected. And, if you factor in the cost of insurance in your monthly spending plan, you won’t get hit with a large bill out of the blue that you don’t have the cash to cover.

Ready to expand your insurance coverage? Because choosing the right insurance company and policy can be overwhelming, Sofi teamed up with some of the best insurance companies in the industry to bring customers fast, easy, and reliable insurance.

If you’re in the market for auto, homeowners, renters, or auto insurance, consider checking out SoFi Protect.

Learn more about how SoFi Protect can meet your insurance needs today.


Ladder offers term policies in New York (policy form # MN-26) that are issued by Allianz Life Insurance Company of New York, New York. Term policies are issued in all other states and DC by Fidelity Security Life Insurance Company®, Kansas City, MO (policy form No. ICC17-M-1069, M-1069 and Policy No. TL-146). Coverage and pricing is subject to eligibility and underwriting criteria. SoFi Agency and its affiliates do not guarantee the services of any insurance company. The California license number for SoFi Agency is 0L13077 and for Ladder is OK22568. Ladder, SoFi and SoFi Agency are separate, independent entities and are not responsible for the financial condition, business, or legal obligations of the other. Social Finance, Inc. (SoFi) and Social Finance Life Insurance Agency, LLC (SoFi Agency) do not issue, underwrite insurance or pay claims under LadderLifeTM policies. SoFi is compensated by Ladder for each issued term life policy. SoFi offers customers the opportunity to reach Ladder Insurance Services, LLC to obtain information about estate planning documents such as wills. Social Finance, Inc. (“SoFi”) will be paid a marketing fee by Ladder when customers make a purchase through this link. All services from Ladder Insurance Services, LLC are their own. Once you reach Ladder, SoFi is not involved and has no control over the products or services involved. The Ladder service is limited to documents and does not provide legal advice. Individual circumstances are unique and using documents provided is not a substitute for obtaining legal advice.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Source: sofi.com