Each year, I bemoan how much my car insurance premium has gone up. In the ten years I have owned my car, its value is now less than a quarter of when it was new, yet the premium has more than doubled. Yet, I begrudgingly pay each year, after a customary call to the insurance company to get a bit of a discount of course!
Many would not even think of driving off with their new car until they have comprehensive insurance in place. The same goes with insuring our home and our contents. We are now so much better in regards taking out travel insurance. As the saying goes, “if you can’t afford travel insurance, then you can’t afford to travel”. Taking out these general insurance policies is just accepted risk management.
If you ask many people about what is the most valuable item they have, they will automatically say their home and contents. While a lot of home and contents can nudge towards the $1 million dollar mark, remember over half the value of a typical property is attributed to the land. As such, if you have an $800k house and land property, you’ll probably attribute say $500k to the house itself plus say another $100k on the contents. That’s $600k that a home and contents insurance policy is covering. Pretty substantial in my book. As such would be worth protecting as part of standard risk management.
However we often neglect something even more valuable than our home and contents. We often neglect to insure ourselves and our ability to earn income. Take a 30 year old, earning $65k a year. Assuming this 30 year old continues to work for 30 years and only get a 2% pay rise (yes, it’s barely inflation!), he or she would earn nearly $3.4 million by the time they turn 65 years old. Surprised? I know I was. I was even more surprise that most Australians do not have adequate cover for themselves. Are you one of these? Although many of us would have default insurance in our super, sadly most of these are not nearly adequate enough.
Do yourself a favour and check out your insurance in your super. If you have an insurance policy outside super, review that as well. Make sure you read through the Product Disclosure Statement and understand what you are covered for and the fine print. Check out the sums you are insured for and ask yourself if it’s enough to support you and your family if you can no longer work and miss out on earning a further $3.4 million.
If you are too busy to review what you have or just need help in understanding the complexities, then speak to your financial adviser or a risk specialist. They can help review what insurance you have and help you understand different types of insurance. As part of their financial services, they can provide you with a plan to ensure you are adequately protected.
If you have a machine that can earn you $3.4 million in the next 30 years, would you make sure that you have adequate insurance for it? I bet the answer would almost be a resounding YES. Then do the same for you and your ability to earn money. After all, this is your most valuable asset. If you fall ill or injured and can no longer work and earn income, then how would you be able to pay for your home and car insurance policies?
AFP® ,B.Bus(Acc), B.Comp, DFP, ADFP
Accredited Aged Care ProfessionalTM
Authorised Representative No. 1238040
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