Having been in the life insurance advice business for over twenty years I have observed a strong and consistent trend when clients consider their financial futures and assets.

This trend still leaves me somewhat perplexed yet forms the basis of much discussion with clients as I attempt to raise their awareness of the consequences of them focussing on insuring their personal possessions rather than insuring the individual's whose efforts have generated the current standard of consumption/living and will underpin future lifestyle through future income producing activity.

Most clients I deal with will have basic cover against real property loss yet very few will have valued and insured their most valuable asset. The vast majority of people when asked the simple question - What is your most valuable asset? They will nominate from the following list usually in this order: 1. House 2. Car/Motor bike. 3. Furniture. If we are to quantify the value of these assets they are usually relatively small compared to the inherent future worth of the breadwinner's income generating capacity.

In Melbourne Australia the average house price has just reached $A500,000 (The Age 2009), a new General Motors 6 cylinder, 4 door family vehicle costs approximately $38,000 (Redbook valuations 2009) - (depending on options). Whilst most families would value their personal furniture etc. at a similar or slightly greater figure to their vehicle.

If we were to take a male 35year old earning average yearly earnings of $62,500 (Wikipaedia) retiring at the age of 65, that person will earn a further $1,875,000 in today's dollars - (ignoring both CPI rises and possible salary increments through promotion, productivity increases etc.).

So here we have the paradox:

* Car / motorbike relatively low value - very high level of insurance take up
* Household contents relatively low/ moderate value - very high level of insurance take up.
* House relatively high value - very high level of insurance take up.
* Future income - very high value - very low level of insurance take up.

Yet if you asked the breadwinner the following question - "If you had a machine that produces at least $62,500 each year for the next 30 years would you insure it??" The answer is universally YES.

One of the greatest challenges a Life adviser faces is getting clients to take a long term view of their income generating capacity and insure against the potential loss (through either illness or accident) of that income. The great irony is that premiums for income protection insurance are actually tax deductible in Australia (with any claim benefits being assessed/taxed as income) yet personal motor vehicles do not generate tax relief (unless used for business purposes) nor do private homes or personal contents.

You need to insure your most valuable asset - your long term income generating capacity.

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