Keeping a roof over your head

It always surprises me when I ask people if they have insured their most valuable asset. Most say, yes we have insured our home.

The truth is for most people their most valuable asset is their ability to earn income. What is it worth? Take your annual gross income and multiply it by the number of years to normal retirement age.

EG: A 35 year old on $60,000 per annum. $60,000 times 30 years equals $1,800,000.

If your income stopped tommorrow many would suffer from financial difficulty by the end of two weeks. This could mean that the family home might have to be sold if the illness/injury causes you to be of work for more than two weeks.

Their are two types of insurance that can cover personal income - Income protection and Salary Continuance. The better quality policies are Income Protection policies and should provide cover on an "own occupation" basis if you were on claim up to age 65.

There are numerous income earners that think they are covered adequately by their income protection available through their superannuation fund. These often have a waiting period up to 90 days and will only cover you for 2 years maximum on claim.

These are some of the issues to consider:

• Own vs Any Occupation definition of disability
• Waiting period before claim can be made - needs to align with your financial situation
• Period the policy will pay out whilst on claim
• Guaranteed renewability - as long as you pay the premiums the policy remains in place regardless of changing health
• Guaranteed Insurability - ability to increase cover by up to 15% without further medical requirements
• CPI Indexed cover prior to claim - cover indexed each year
• CPI indexation of benefit whilst on claim
• Does the policy cover both employed and self employed income including income derived that may be split with a spouse

You should check if you have this in place and if so how good the policy is.

Premiums on Income Protection are tax deductible.

Regards

Damian Ebzery B.Bus M.Bus AFPA ASA