Why Protecting Your Income Is More Crucial Than Insuring Your Luxury Car
📅 Published: Apr 25, 2024 | ⏳ Reading Time: 3 Minutes
Author: Becky Lau – Principal Adviser of Earnest InvestSmart
Introduction
When it comes to insurance, most people prioritise protecting tangible assets like their luxury car. Comprehensive car insurance is seen as essential—it covers damage, theft, and financial loss. But what about an asset even more valuable than any car? Your future earning potential.
Many Australians overlook income protection insurance, despite it being a key financial safeguard that ensures stability in case of illness or injury. Let's explore why protecting your income should be a higher priority than insuring a depreciating asset.
👉 Looking for ways to protect your financial future? Read: Top 5 Must-Have Insurance Policies for Australian Professionals
Your Income Appreciates, But Your Car Depreciates
Understanding Asset Value
Imagine purchasing a luxury car for $150,000. From the moment you drive it off the lot, its value drops by 20-30% within the first year. Within five years, it’s worth less than 40% of its original price.
Now, compare that to your earning ability. If you’re 30 years old and earn $150,000 per year, with a modest 3% annual salary increase, you will earn over $7 million by the time you retire at 65. Unlike a car, your income potential grows over time through experience, promotions, and skill-building.
💡 Tip for Australians: The average Australian household spends thousands on car insurance annually, yet many don’t have income protection insurance—leaving their largest asset unprotected.
👉 Want to secure your income long-term? Read: Long-Term Financial Planning: The Smartest Decision for Your Future
Why Income Protection Insurance Is Essential
1. Your Income Is Your Greatest Asset
Your ability to earn a salary is the foundation of your financial well-being. If illness or injury prevents you from working, how would you cover your mortgage, daily expenses, or investments?
✔ Income protection insurance replaces up to 70% of your salary if you’re unable to work.
✔ Ensures you stay financially stable without relying on savings or government support.
👉 Need a backup plan? Learn about:* Wealth Protection Strategies for Australian Families
2. Sustains Your Lifestyle & Financial Plans
✔ Just like car insurance covers repair costs, income protection covers living costs—so your lifestyle remains intact.
✔ Prevents you from dipping into retirement savings or selling assets to pay for essentials.
✔ Supports ongoing investments, mortgage repayments, and education funds.
3. Reduces Financial Stress & Offers Peace of Mind
✔ Medical recovery is faster when you’re not worried about money.
✔ Ensures your family’s financial security, even if your income stops temporarily.
✔ Helps you focus on getting back to work without financial strain.
💡 Tip for Australians: Some income protection policies in Australia are tax-deductible, making them a smart financial choice.
The Real Cost of Not Having Income Protection Insurance
Many Australians assume they’ll “get around to it later” or think superannuation’s built-in insurance is enough. But delaying income protection can have serious financial consequences:
❌ Savings Depletion: Relying on savings to cover expenses can wipe out years of hard-earned financial growth.
❌ Increased Debt: Without coverage, some are forced to take out loans or rely on credit cards for bills.
❌ Limited Government Support: Workers’ compensation and Centrelink payments are often insufficient for covering full income needs.
👉Want to declutter your financial risks? Read: Declutter Your Finances: Why Life Insurance is Key to Financial Security
Conclusion: Your Income is Worth More Than Any Car
While luxury car insurance protects a depreciating asset, income protection safeguards an appreciating one—your future earnings. Ensuring your ability to earn is far more valuable than protecting an item that loses value over time.
What should be your financial priority? Investing in income protection insurance, which keeps you financially secure through unexpected life events. It’s not just a smart financial move—it’s an essential one.
📩Want to secure your financial future? Schedule a free consultation today!
📚 Further Reading & Related Articles
Top 5 Must-Have Insurance Policies for Australian Professionals
Long-Term Financial Planning: The Smartest Decision for Your Future
No Advice Warning / General Advice
The purpose of this website is to provide general information only and the contents of this website do not purport to provide personal financial advice. Earnest InvestSmart strongly recommends that investors consult a financial adviser prior to making any investment decision. The contents of the Earnest InvestSmart website do not take into account the investment objectives, financial situation, or particular needs of any person and should not be used as the basis for making any financial or other decisions. The information is selective and may not be complete or accurate for your particular purposes and should not be construed as a recommendation to invest in any particular product, investment, or security. The information provided on this website is given in good faith and is believed to be accurate at the time of compilation.
