Should Insurance Payments Keep You from Investing?

Amara Alessi Sanders
June 9, 2020

While some types of insurance can be excessive, and monthly costs can feel burdensome if you go a while without actually needing to file a claim, the basic reasoning is always sound: It’s better to be protected than not. At the same time though, insurance costs can add up significantly, to the point that many feel they need to choose between adequate coverage and other financial ventures. For example, what if your insurance payments keep you from being able to start an investment portfolio?
Consider home insurance alone. It’s fair to say that monthly payments can easily approach $100 a month or more. In fact, the rate is roughly $35/month for every $100,000 of the home’s value. So in theory, it costs roughly $70/month to maintain insurance for a $200,000 home, $105/month for a $300,000 home, and so on. That’s before any additional types of insurance most people consider necessary to buy.
These costs can significantly take away from your ability to regularly contribute to an investment portfolio. There are some ways around this problem, however. Those who wish to maintain sensible insurance policies and invest in their futures may simply need to look into some investment opportunities that are more conservative, or which allow for more control with fewer funds.
The following are a few popular examples:
CD Ladders
CD ladders are, essentially, an alternative to ordinary savings accounts. On its own, a CD (certificate of deposit) is a savings account but one that accrues more interest, in exchange for being kept in place for a set amount of time. So, when you establish a CD you stand to make a greater return than you would in a savings account, but you can’t withdraw your funds until a given date. A CD ladder is simply a term for staggering CDs, such that you can have multiple accounts maturing and can withdraw them at different times. These can be appealing methods of investment when there aren’t many funds available because they’re very straightforward and even small amounts can mature.

Stock CFDs

Not to be confused with a CD, the term CFD stands for contract for differences, and it is basically an alternative way to trade stocks (or other assets). In CFD trading, you put in an order to buy a stock if you believe its value will strengthen, and an order to sell if you think the opposite. You don’t actually have to buy a quantity of the stock or asset, so much as invest in its direction. This takes some of the pressure off for traders and makes it somewhat easier to invest with smaller amounts. Additionally, CFD trading can involve stop-loss orders, which pull investments if a predetermined amount is lost (another function that can be reassuring when limited funds are available).

Mutual Funds

Mutual funds are among the most popular investment tools for individuals and professionals alike, in large part because they’re viewed as relatively easy ways to get into the stock market. Participants can invest a given amount and then simply leave it in the fund, while an experienced trader manages them. The funds are diversified, and each individual user can withdraw his or her investment and return when needed, with a fee taken out by the fund manager. This too can be an appealing arrangement because it’s a conservative approach that usually doesn’t require a particularly hefty up-front investment.

Investment Apps

Today, people can also experiment with investment apps. There are different specific apps to choose from, but for the most part they’re valued for offering stock market access with little to no fee, as well as for allowing users to set up portfolios with very small amounts. In many cases they still require active trading, which can be a challenge. But they’re among the most affordable investment options available today.
Options like these may or may not be appropriate for you. But they do illustrate some of the more straightforward and affordable investment opportunities that are out there for those with hefty insurance payments. Finding enough money to invest in both protection and your own future can be difficult. But insurance shouldn’t stop you altogether from pursuing other investment opportunities if you’d like to do so. Make sure you are getting the lowest insurance rates by comparison shopping with SmartFinancial.

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