Author: John Raymond Leske
Most people insure their motor vehicles, their homes and their home contents. These are valuable assets that, in the event of various catastrophes, they want to be able to replace or repair without significant financial loss.
But when it comes to what is many people’s most valuable asset – their ability to earn future income – they are woefully positioned to cope financially with catastrophe. Research completed in 2006 indicated that only 55% of Australian families had any life insurance, with an even lower 31% having income protection.
Even for those with some personal risk protection, the amount of cover is generally inadequate. There are numerous reasons for this unwillingness to adequately insure, including such “rationalisations” as:
- I’d prefer not to think about negative possibilities;
- I’m healthy, it won’t happen to me;
- I’m covered by my super, workers compensation, health insurance, “the government” etc;
- Insurance is just too expensive.
We help our clients achieve their version of financial independence. But no family can ever consider itself financially independent if the death or disability of a family member requires a significant adverse change in lifestyle expectations, due to inadequate financial resources.
The reality is that many families, particularly those with breadwinners early in their careers, just cannot afford not to purchase personal risk insurance. And sometimes lot’s of it, as we discuss in the case study below.
A life insurance case study
Let’s consider the hypothetical case of Mr John Professional. John is 35 years old and intends to work until age 65. He is the expected sole income earner in his family, also comprising his wife and two young children. The Professionals currently have no net investment wealth – all their current wealth is tied up in lifestyle assets (i.e. residence, cars etc).
Listed below are some other assumptions relevant to considering John’s life insurance requirements:
Current income after-tax (in today’s dollars):
$300,000 p.a.
Growth in after-tax income (after-inflation):
1.50% p.a.
Family lifestyle expenditure (in today’s dollars):
$200,000 p.a.
Retirement expenditure (in today’s dollars):
75% of pre-retirement expenditure
Growth in expenditure (after-inflation):
1% p.a.
Family expenditure if John dies:
80% of Family lifestyle expenditure estimate
Investment return (After-tax and inflation):
3% p.a.
The following chart shows what happens to income, expenditure and investment wealth, assuming the Professionals’ lifestyle expectations are not affected by personal catastrophe.
Article Source: http://www.articlesbase.com/business-opportunities-articles/have-you-protected-your-most-valuable-asset-2802489.html
About the Author
Wealth Foundations is an independently owned personal financial advisory firm that offers wealth management and strategic financial planning services. For more information, visit Wealth Advisers
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Miami Caterers
July 29, 2010 at 11:10 pm
Carl had to visit his parents in Phoenix but he didn’t own a car so I suggested a car rental that will help him. Since it was important, he had to do it. It didn’t cost him much though and he got to Phoenix on time. He was grateful of the idea and he thought about purchasing one in the future. I keep thinking about our trip to Disney Land this weekend. We don’t own a car but my father will be renting a car from a car rental near our place. He will be choosing a big one since there are a lot of us in the family. I’m sure we will have fun in the trip with the car he has picked.
Miami caterer
August 4, 2010 at 2:03 pm
3. My husband and I were conversing about how we lived our lives in the past few years and life in general. I always enjoy spending time with him through a wonderful conversation.
Miami caterer
August 4, 2010 at 2:23 pm
My partner and I were conversing about how we lived our lives in the past few years and life in general. I always enjoy spending time with him through a wonderful conversation. Our professor gave us a school assignment where we have to write a song about life in general. I’m studying Art and Music in a college in our city and I’m really thrilled to begin working on the project we were assigned to do.
Miami Wedding
August 4, 2010 at 2:42 pm
My partner and I were talking about how we spent our lives in the past few years and life in general. I always enjoy spending time with him through a wonderful conversation. Our teacher gave us a school project where we have to compose a song about life in general. I’m studying Art and Music in a college in our town and I’m really thrilled to start working on the project we were asked to do.
Event Planner Boca Raton
August 4, 2010 at 3:22 pm
I was watching my children playing by the lawn and they were so busy playing with their toys. I always enjoy watching them as they are but every time I start thinking that they’ll be going to school before long worries me. Life in general can be very easy when you’re still little but things become difficult as you grow up.
Event Planner Boca Raton
August 4, 2010 at 3:38 pm
I was watching my children playing by the lawn and they were so busy playing with their toys. I always enjoy watching them as they are but every time I start imagining that they’ll be going to school soon worries me. Life in general can be very happy when you’re still little but things become difficult as you grow up.
Miami
August 4, 2010 at 3:56 pm
9. My partner will be leaving next month for Australia due to work related reasons . I was worried that living away from each other will produce problems in our relationship in the future. However he assured me that everything will be good enough and there’s nothing to be anxious about. Life in general can be a little harsh for us newlyweds to fall in a situation like this.
birthday party supplies
August 6, 2010 at 8:46 pm
Wonderful blog! I truly love how it is simple on my eyes as well as the details is well written. I am wondering how I could be notified whenever a new post has been made. I have subscribed to your rss feed which need to do the trick! Have a nice day!
Dentist Boca Raton
August 12, 2010 at 7:27 pm
I went to the dentist a last month to have my braces on. I’m still having difficulty in chewing because of the wires. I also noticed that I’m having a lot of cuts inside my mouth because of the wires and I find it very undesirable. When I was a kid I’ve always dreamed to become a dentist. That’s the reason why I went to college to study dentistry. I’m currently in my sophomore year and I’m wishing that I’ll be able to pass in all the subjects so that I can graduate soon enough and be able to practice my dream job . We were fooling around at the pool yesterday when I accidentally slipped and hit my face on the ground . I thought nothing was wrong when I noticed I lost my front tooth. It was later that I realized that my mouth was full of blood because of the missing tooth. We immediately went to the dentist to get it repaired.
Cosmetic Dentist
August 12, 2010 at 7:48 pm
I’m thinking to set an schedule with my dentist tomorrow for a check-up since I’ve been experiencing from tooth sensitivity lately. I find it very agonizing to consume a glass of cold water which is absolutely unusual for me. I was amazed to see my co-worker with really white teeth yesterday. She said she visited to the dentist to have her teeth bleached. Because of her testimonials I’m planning to visit my dentist next week to have dental bleaching as well.
Dentist
August 12, 2010 at 8:05 pm
I visited to the dentist a few weeks ago to have my braces on. I’m still having difficulty in eating because of the wires. I also observed that I’m having a lot of cuts inside my mouth because of the wires and I find it very undesirable. When I was little I’ve always wanted to become a dentist. That’s the rationale why I went to college to study dentistry. I’m already in my sophomore year and I’m hoping that I’ll be able to do well in all the courses so that I can graduate soon enough and be able to do my dream profession. We were fooling around at the pool yesterday when I accidentally slipped and hit my face on the floor. I thought nothing was wrong when I realizes I lost my front tooth. It was shortly that I realized that my mouth was full of blood because of the missing tooth. We instantaneously went to the dentist to get it fixed .
Cosmetic Dentist
August 12, 2010 at 8:29 pm
I’m thinking to set an appointment with my dentist tomorrow for a check-up since I’ve been suffering from tooth sensitivity recently . I find it very painful to consume a glass of cold juice which is definitely unusual for me. I was astonished to see my officemate with really sparkling teeth yesterday. She whispered she visited to the dentist to have her teeth bleached. Because of her statements I’m thinking to visit my dentist next week to have dental bleaching as well.
Raton
August 18, 2010 at 4:32 pm
I was watching a movie with my Mom about the life of a mother and daughter and life in general for the two of them. I was surprised when the movie finished because my Mom couldn’t stop crying because she was so moved with the movie. I’ll surely endorse that movie to my friends.
Raton
August 18, 2010 at 6:00 pm
I always enjoy going to the mountains and stay there in a cabin for a couple of days to have some time for myself to run away from everything. It always relaxes me and it’s the only time when I get the opportunity to think about life in general and its importance.