If You Owned A Money Printing Machine, Would You Insure It?
In the pursuit of building our ‘ideal’ lifestyle, most of us tend to focus on what we want as being urgent, instead of what is important for our long-term needs. Taking out that enormous mortgage to buy our dream home and fill it with lots of stuff that we want, but probably don’t really need, seems urgent - but is this stuff really important? The upgrading of our cars, the purchasing of the newest sparkling trinket, toy or gadget, or dining out multiple times a week takes priority in the household budget ahead of items that may be very important but not urgent. Perhaps not urgent until it’s too late.
Imagine for a second that you have a machine in your garage that tirelessly printed money seven days a week, 52 weeks a year. It is a well-oiled machine and has never skipped a beat. Do you think it is important to insure it? Just like you insure your car or your home? For most, this money printing machine just sits there at home, unprotected and uninsured.
You guessed it – this machine is YOU. Now imagine that you could no longer work and generate income to fund your lifestyle or provide for your family. What would you do if you could no longer meet those large mortgage repayments? All of those life dreams are replaced with medical costs and worries about money, specifically about not having enough money. An insurance policy (that could have been put in place for a relatively low cost) to cover your loss of income and pay your debts so that you can focus on your health now seems very urgent, but it is unfortunately too late.
Your capacity to generate income until the day you decide to retire is too often taken for granted and severely undervalued. If we were asked to write down our most valued assets, most of us will list our home and other investment properties, maybe our share portfolio or our superannuation fund. Some may also put down their business as their most valued asset. What so often gets missed is the greatest asset of all – our capacity to earn income into the future. For example, if a 30-year-old was earning $100,000 per year, increasing by only 3% each year, they would have earned approximately $6,327,594 by the time they reach age 65 – easily making their capacity to earn future income the most valuable asset they have today.
The sad reality is that 1 in 3 Australians will have a major medical event or illness (e.g. cancer, heart attack, stroke) between the ages of 30 and 64. Even more alarming is the statistics from the Rice Warner ‘Underinsurance in Australia 2015’ report that states that less than half (42%) of Australians have enough life cover to provide the same standard of living for their families if they were to pass away or could no longer work. Although most Australians have some form of life insurance, either in their superannuation fund or through a retail product, this cover just simply isn’t enough.
So, if you owned a money printing machine, would you insure it? Given that this machine is your most valuable asset today and it doesn’t cost too much to put protection in place (and most of the time it’s tax deductible!), the answer should always be yes.