Protecting your greatest asset

While I was casually flicking through the Sunday paper last week, I came across an article by Money expert Mark Bouris that caught my eye…

The headline read: 'What is the biggest asset that you have to protect?''

Like most people I thought instantly of the family home, but Celebrity Apprentice judge Mark correctly pointed out that most people forget to mention their health and ability to earn a living.  “This is without a doubt our biggest asset - lifetime earnings, for most Australians, equal between four and six times the value of the equity in their homes.”

I chuckled to myself that I need not worry as I have Income Protection insurance, along with Trauma & Permanent Disability, Health, Home, Car, Pet, Travel and just about every other insurance known to mankind…

Just to be on the safe side, I emailed my broker to double check, only to find I don’t have Income Protection! How could that be? The combined cost of my insurances each month is around $1000 but doesn’t include the most important insurance????

And therein lies the problem. I tried so hard to do the right thing and cover my family in the event of something happening to me, as the primary bread winner and somehow, Income Protection slipped through the net…

Mark’s company, Yellow Brick Road did some research, interviewing more than 500 employed people aged 20 to 45 on the eastern seaboard, most of them earning between $50,000 and $100,000 a year. Forty per cent of them had kids. Shockingly, just 3.1 per cent were unaware of income-protection insurance. In other words, Aussies know about protecting their incomes. Yet 83 per cent of Australians have comprehensive car insurance, while just 6 per cent protect their income.

Survey’s conducted by the Fiftyup club repeatedly site a main reason for members not switching health insurers, because of the fear of losing cover for pre-existing conditions.

At the time I took out my TPD and Life insurance I had no medical conditions but a marriage breakdown and redundancy later and I have high blood pressure. It would be difficult for me to get cover now because of this so I’m staying with my original policies.

31.7 per cent of the respondents to Mark Bouris’ study said they didn't think they had income protection unless it was provided by their super fund but have you taken the time recently to check your super fund cover?

The fact is, three out of five of the big industry funds don't have income protection as a default option, so if you're relying on an industry fund to look after you in this respect, you could be out of luck.

Here’s Mark’s advice:

You should see an adviser or a broker and ask about three things:

Monthly earnings (you'll be covered for up to 80 per cent of current earnings)

Wait period (can be as low as two weeks)

Duration of payout (usually ranges from one year to retirement age)

If you haven't investigated these policies before, I urge you to at least talk with an insurance broker or financial adviser. You should have a policy that suits a full-time, part-time or self-employed person and it must be a policy that covers what you need without you paying for what is irrelevant.

The cost is also an important factor in relation to income protection. Our research shows 42 per cent of people thought it was too expensive, even though a 40-year-old white-collar worker can be covered for $1.50 a day.

Mark Bouris is executive chairman of Yellow Brick Road Wealth Management.

FiftyUp Club Pty Ltd ACN 166 905 175 (FiftyUp Club) is a Corporate Authorised Representative (AR Number 465649) of One Big Switch Pty Ltd ACN 150 963 474 (AFSL number 455982). Any advice provided is general advice only and does not take into consideration your objectives, financial situation or needs. Before acting on any advice you should consider its appropriateness to your situation.