How long would you and your family survive financially if something happened to you? What is your biggest financial asset today? Many answer this question with “my home”. However, for most, their biggest asset is their health… their ability to get up every day and earn a living. Cash flow is most family’s biggest asset. What about you?

If your health is your biggest asset – then what are you doing to look after this asset? Are you being a good asset manager by eating right and exercising regularly?

What about the unexpected?

Sometimes things just happen in life that we simply can’t do anything about. Recently I had a client diagnosed with a neurological disorder. She is 49 years old and has been forced to give up her profession as a specialist vet.

This may have been disastrous for her family’s finances as they heavily rely on the income she produces.

I’ve also had a client who was ice skating, fell over and ended up in hospital off work for a long period of time with an amorism.

Gladly for both clients they had appropriate income protection cover. So while they can’t work and earn a living, their income protection policy has kicked in. For my vet client she’ll receive ongoing income benefits until she is age 65. For the ice skater, he returned to work after 3 months and a full recovery.

A recent survey in the United States discovered that most families are only 1 month from being broke. I’m sure the Australian situation is not much different. How do we act responsibly to prepare for this possibility?

Income protection insurance

Income protection insurance is available in different forms and given its importance, it is essential to get the right cover.

Often the best cover is held outside your super fund. There are a number of reasons for this but here are the top two:

1. The cover provided in super funds is what is known as indemnity cover. Indemnity cover is based on your past 12 month’s earnings only and doesn’t guarantee the benefit level.
2. The cover provided is only for a period of 2 years.

The cover that I often recommend is held outside of super, with guaranteed levers of cover and benefit periods up to age 65. The icing on the cake with cover held outside of super is that the premiums are tax deductible.

So make sure you protect your biggest asset. Look after your health and get some income protection insurance. If you have it already and haven’t reviewed it in the last 3 years – it’s time you did.

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