Most people would immediately say their home and in terms of a tangible asset, they’re probably right.
But what if that home, like many homes, still had a mortgage on it?
The person servicing that mortgage – you – and in turn your ability to work, could rightly be considered your most valuable asset.
It’s a given most people take out insurance on their house, but what about the income that services the mortgage on that house?
Income protection insurance is an essential part of risk insurance because illness and injury can quickly take their toll.
Take the average percentage of after tax income spent servicing debt in Australia, according to a Genworth International Mortgage Trends report it’s 45 per cent.
Then take the latest Treasury Department figures showing the ratio of household debt to annual household income was 160 per cent.
That’s just the debt; it doesn’t include council rates, water, electricity, telephone, internet, food or petrol.
With the amount of commitments you have to service, consider how much of your income is left over on a weekly basis.
Often that’s an excuse to say, “I can’t afford to have income protection insurance.”
But when a person considers how many non-negotiable expenses are tied to their weekly pay packet, it’s surprising those words aren’t, “I can’t afford not to have income protection insurance.”
Covering up to 75 per cent of a lost income until you are able to go back to work, or until the maximum benefit period expires, it can prove a significant safety barrier if a breadwinner is ill or injured.
And while it is an additional cost, income protection insurance is tax deductable.
Now, what’s your most valuable asset?
Peter Mancell is a director of Mancell Financial Group and FYG Planners AFSL / ACL 224543. This information is general in nature and readers should seek professional advice specific to their circumstances. Need help with your financial your financial future, we think we’re Australia’s top financial adviser. Think you need a lawyer for a superannuation claim? Think again!
