Most people tend to think that their most valuable asset is their home, their investment property or their brand new car.
But what many people don’t consider to be an asset, could be the most important one – your income (and ability to earn an income in the future).
If you are aged 30 and let’s assume you earn an average of $100,000 p.a. until you retire (say in 35 years time), your future income is worth $3,500,000. This is not factoring in any pay-rises, promotions or inflation in general.
Yet as a nation we are chronically underinsured, especially when it comes to income protection insurance.
A study by Comminsure estimates that 67% of Australians have either no income protection insurance or insufficient income protection to cover them until retirement. Furthermore, two thirds of Australians between the age of 25 and 49 would have to rely on Government support if they were injured or fell ill and were unable to work.
What's more alarming is that half of those with a mortgage or dependent children have no income protection cover at all.
If you become sick or injured and are unable to work, how would you pay the bills tomorrow without placing undue pressure on those around you?
Especially if you are self-employed, you have no sick leave, annual leave or long service leave to fall back on. A recent article in the Sydney Morning Herald highlights this fact and is a must read for anyone without appropriate income protection cover.
Be prepared for the worst – Sydney Morning Herald – Wednesday June 6th 2012
To find out more about income protection, the following video prepared by AMP is a great place to start.
To find out more about insurance in general, you should check out our 'PSK's Guide to Insurance in Plain English'.
As always, if you have any questions or comments or would like to discuss risk protection or any other financial planning issue, please feel free to email us at email@example.com.
Enjoy your weekend guys,
- Michael @ PSK