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It costs peanuts to insure your most valuable asset

What do you consider to be your most valuable asset? For almost all of us it’s our ability to earn an income.

Your house is not your biggest asset!

Consider a 25-year-old man earning R25 000 per month. Let’s assume his income grows along with inflation (six percent) and he retires at 65. He would’ve earned roughly R46-million!

Do you still think your house is your biggest asset?

How to insure your biggest asset by far

An income protection policy insures you against loss of income due to temporary or permanent disability or illness.

In other words, if you are unable to do your job due to injury or illness, the insurance company will pay your salary until you can return to work or, in the case of permanent disability, until you reach the retirement age (or even for the rest of your life).

How much does it cost?

Let’s assume that the man mentioned in the example above is a non-smoker earning R300 000 per year. He has an undergraduate qualification and works in an office.

The cost of insuring his income is about R130 per month.

The cost of insuring a woman of the same age and income could be slightly cheaper.

You might have income protection already

Many employers offer income protection under their company’s pension or provident fund. Make sure you understand the benefits and that you don’t have shortfalls.

Insurers differ in how they structure and price their products. Shop around, but stick to a reputable company and a financial advisor you can trust to offer honest advice.

Insuring your future income should form the foundation of your financial portfolio.

Also read the following articles by Claude Hannah:

- How much you should save for retirement

- Savers rejoice! South Africa gets tax-free savings accounts on 1 March 2015

- Why medical aid is woefully inadequate (and how affordable gap cover helps)

- Can’t (or won’t) buy to let? Don’t sweat; there’s a far more lucrative option

Claude Hannah is a financial planner for Venn-Sure Consulting. He completed a degree in Financial Risk Management from the University of Stellenbosch in 2006 as well as a post graduate diploma in Financial Planning. Claude helps to organise and simplify the often complicated and busy financial lives of his clients. He takes great pride in providing the highest level of service to help his clients build and protect their wealth. For more information, email him (claude.hannah@liblink.co.za) to arrange for a free consultation.


This article first appeared on 702 : It costs peanuts to insure your most valuable asset


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