Is insurance an expense or an investment?
When the budget doesn’t seem to be going as far as it used to it is human nature to try and stretch it further by reducing those expenses which aren’t providing value for money.
Insurance products when percieved purely as an expense are often the first budget item cancelled.
However, the risk of disability is great.
| Out of 1000 people, the number who will be disabled before age 65 | |||
| At Age: | At Age: | ||
| 20 | 789 – 4 out of 5 | 45 | 573 – 1 out of 2 |
| 25 | 756 – 3 out of 4 | 50 | 489 – 1 out of 2 |
| 30 | 723 – 7 out of 10 | 55 | 377 – 1 out of 3 |
| 35 | 685 – 2 out of 3 | 60 | 377 – 1 out of 3 |
| 40 | 635 – 2 out of 3 | ||
| Source: MLC underwriting | |||
Let me paint a different picture of the way you could percieve income protection premiums as an investment rather than an expense: You are offered two identical jobs paying slightly different packages.
- Job Gamma: Salary of $35,000 with 4 weeks sick leave
- Job Delta: Salary of $33,500 with sick leave to age 65 and tax deduction of $1,500 for income protection premiums.
When Insurance products are fully understood, appreciated and valued for the assurance or easy freedom from self-doubt and uncertainty they provide, it becomes much easier to acknowledge the product for the investment it really is.
In an earlier post “Protecting what’s important to you” we explored a values based approach to determining an appropriate wealth protection solution for you. If you haven’t read it before, I’d encourage you to do so. People have told me they gained value from the reflection undertaken.
Sometimes it is difficult to talk through what if scenarios in your own mind. This is something Plan 2 Prosper can assist you with.
Remember what is right for your situation, will most likely be different to another persons as a result of the things that you personally value.