Let me ask you: What is your biggest asset?
I recently read an article in the Sydney Morning Herald that cleverly encapsulated what Campbell Green is always advising our clients.
Over the years, I’ve lost count of how many times people have given me the wrong answer to this question: What is your biggest asset? Most people say it’s their family home, their investment property, their car, or maybe their business.
In actual fact, your biggest asset is your ability to earn money!
Writer, Thabojan Rasiah uses this analogy:
“If you had a machine at home in the corner of your living room and it spat out $100,000 each year, would you insure it? Of course you would!”
And he’s absolutely right. Taking out income insurance is one of the smartest decisions you can make, and the earlier you do it, the better.
Thaborjan goes on to explain exactly why your ability to earn is such a vital asset.
“Looking at it simply, if you earned, say, $50,000 a year (increasing at the rate of inflation) from the age of 25 to the age of 65, you would have earned more than $3.26 million after tax. Similarly, if you earned $100,000 a year from the age of 35 to the age of 65, you would have earned more than $3.65 million after tax.”
So, when you compare $3.65 million with the average Australian house value of around $450,000, it should make income insurance a very easy decision.
Now, I’m not going to list all the terrible ‘what if’ scenarios about accidents, disabilities or diseases that could befall you. Instead, I’d like to counsel you to think about income protection in exactly the same way you think about insuring your house or car.
When you buy a house, you insure it straight away – not because you think it’s under imminent threat of fire or flood, but just so you know it’s sorted. When you purchase a new car, you wouldn’t dream of driving it out of that show room without insurance in place. The chances of having an accident on your very first drive are extremely slim, but you insure it nonetheless. Why? Because these insurances give you confidence that whatever happens, your assets are protected. Having complete peace of mind means you can move on and not spend another second worrying about ‘what if’.
Of course, income protection costs money in the form of premiums, and this is a big deterrent for a lot of people. But there are two things I’d like to point out:
- Locking in cover when you are young can save you considerable money on premiums both in the long- and short-term.
- Most of the time, income protection insurance can be paid for in a way that doesn’t hurt your hip pocket, for example through your super.
When you do make the decision to protect your income, remember that just like private health policies, there are many different types of income protection policies. Obtaining the right policy that suits your specific needs and circumstances, and that will cover you properly in the event of a claim, is incredibly complex. The tiniest details in a criteria or disclaimer can make a massive difference to what you’re entitled to.
Talk to Campbell Green about what sort of income protection policy is best suited to you.
