What is a Reasonable Amount to Spend on Insurance?

Before purchasing life insurance, it’s recommended to study detailed information including health risk, risk at work, or the type of insurance and proper coverage. Most significantly, you should allocate an appropriate amount of money to fit your income. Never forget that once purchasing insurance, you’ll have to pay long- term insurance premium so you should set a primary plan to avoid financial distress. 

The following question is how much sum insured should I carry? or how much premium should I pay a year? It’s best to choose the moderate sum insured so that you don’t feel like having much burden. Don’t go for high sum insured that requires you to pay a large amount of annual premium, and you later have to end up with cancellation along the way. Therefore, your first concern before purchasing insurance is paying the right amount of insurance premium that doesn’t disturb your financial standing.

Allocating the proper amount of your income to purchase insurance will allow you to pay its premium completely throughout the insurance terms. Managing money to apply for insurance can be considered by two groups regarding to income level comprising those who earn a salary as major income, and self-employed people or freelance whose monthly income are not fixed.

When classifying by source of income, we found that those with consistent salaries are capable of allocating their income for insurance. They can simply give out 10% of their monthly income for insurance. However, those who don’t carry much financial burden and have low expenses may allocate more, such as 15% or 20% of their monthly income to apply for insurance (Source: The Financial Planners Association).

For example; You earn 15,000 Baht when start working, and share 10% of your monthly income for insurance (1,500 Baht per month). When your income is higher and you still keep your insurance at the same level (10% of income per month), you’ll have more of both savings and protection coverage in the future. For example; the Salary is 50,000 Baht while the insurance ratio remains at 10% of income per month (5,000 Baht per month). With increasing income even though the insurance ratio is stable if you pay more premium, your protection coverage will be increased.


For self-employed workers or freelance, they need to carefully consider the money allocated to purchase insurance due to limited income. They can calculate the expected income in that year. The amount of money shared for insurance depends on each individual’s income. To avoid lacking money to pay the insurance premium, they may choose insurance with a one-time premium payment per year

Most people tend to think that insurance always comes with a high premium so they never plan to purchase it. In fact, there’re many types of insurance and their premium, coverage, and limitation vary by sum insured. Thus, it’s important to choose insurance in accordance with your need, allocate the right amount of money, and compare the protection coverage from each type of insurance. 

For example; a person aged 35 years with 500,000 Baht annual income, allocating 10% of income to purchase insurance (pay insurance premium 50,000 Baht per year) will receive different protection coverage regarding each type of insurance as follows:


Life Insurance

Period of Premium Payment

Period of Protection Coverage

Protection Limit (Baht)

Term life insurance 10/10

10 years

10 years


Whole life insurance 90/10

10 years

Until age 90 years


Endowment insurance 15/10

10 years

15 years


Annuity insurance 85/10

10 years

Until age 85 years


Source: The Financial Planners Association

No matter there’re many types of insurance, the key is its objective. For example; if you need insurance focusing on family protection but have a limited budget, you can select Term life insurance. However, if you can afford to pay more premiums, Whole life insurance will be a good choice as it offers longer protection coverage. When you gain higher income and have more than enough, Endowment insurance would be the best and you’ll receive a large sum of money when the insurance term ends. Or, you can select Annuity insurance to grow income after retirement. Both Endowment and Annuity types don’t emphasize protection but cash returns for spending in the future.

Once you have insurance, you’re able to increase protection in your contracts, such as accident insurance, disability insurance, critical illness insurance, and medical insurance. The period of years of protection coverage can be chosen when you sign an additional contract or maintain the same as major contract


Benefits of Life insurance

1. Benefits for “Insured”: Create discipline in saving money for the future, especially for spending it during retirement or if you become disabled. To cope with future situations in order to live life without worries. Insurance is a form of investment and some insurances are sold together with Mutual Fund so the Insured will receive both protection and investment. Some insurances also offer dividends. Besides, the insurance premium that is paid, can be taken for tax deduction regarding The Revenue Department’s conditions.

2. Benefits for “Family”: Insurance is like a security guarantee for family members. In case the primary income earner leaves the family before the age, the Beneficiary will receive compensation from life insurance as compensation income of the passing of the primary income earner. Consequently, the family members will be able to move forward.

 Source: The Stock Exchange of Thailand

Insurance is a countermeasure to relieve the severity of unexpected situations and a significant part in financial planning. As insurance can reduce financial loss, it helps decrease expense burden, protects savings, and compensates lost income. Before purchasing insurance, it’s suggested to study the type of insurance that fits your goal and your potential to pay its premium in order to avoid financial challenges in the future.