Is your most valuable asset exposed?

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Is your most valuable asset exposed?

Imagine owning an asset that is more valuable than your house, car and other possessions put together. Wouldn’t such an asset be worth insuring?

Remember buying your first car or some other object that excited you? The sense of achievement and the pride of owning something of great value is a feeling that few would forget.

Later on you have the thrill of purchasing your first home, which brings with it a great sense of establishing your own future and providing a foundation for life for you and your family.

Taking on the responsibility of owning major assets like these is usually followed by a strong urge to protect their value by insuring against mishaps, such as loss, fire, storm or other calamitous events. Insurance makes emotional sense through the peace of mind it provides and logical sense through the security it may provide to replace or repair the asset if the worst happens.

But what is your greatest asset?

Physical assets, such as cars, homes and other possessions may amount to substantial value measured in tens or hundreds of thousands of dollars.

However, these may not be your greatest assets. Your greatest asset is arguably the thing that underpins all of your other purchases and assets and, indeed, your very lifestyle. Put simply, your capacity to earn an income.

Consider your lifetime earning potential

To illustrate how your income earning capacity may be your greatest asset, let’s project some simple figures.

Imagine a 20 year old earning $30,000 per year. Even if that person never experienced a pay rise for their entire life, they will have earned $1.35 million by the time they retire at 65.

Scale that up to a 30 year old earning $100,000. With no inflation their lifetime earnings amount to $3.5 million by 65.

There’s a lot at risk

If you had any other asset that was valued at those sorts of figures you would probably not hesitate to insure it, due to the sheer scale of the cost to replace it. The fact that income is not a tangible asset like a house or car, however, means that many people fail to consider it as an asset at all and leave it exposed to risks.

Even though it is not a tangible asset, income is subject to a range of risks that could temporarily or permanently stop it from flowing. An accident could leave you off work for weeks or months, or in some extreme cases could leave you incapacitated permanently. An illness could similarly affect you for an extended period. In the very worst scenario, premature death could occur and leave a dependent family totally exposed to having no income at all.

Income replacement protects your future

To protect against the risks of income loss and the impact it would have on loved ones, an effective solution is to insure one’s income and one’s life. Income protection provides a monthly income stream for temporary or permanent income loss due to illness or accident. Life insurance can provide lump sum cover to replace a lifetime of income. TPD cover can also provide lump sum cover in case you become totally and permanently disabled. Finally, trauma cover can give you lump sum cover if certain serious medical events occur.

Your adviser can tailor a personal insurance package to suit your situation and help secure your family’s future against the loss of a significant asset.

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