Broker Check

What Is Your Most Valuable Asset?

January 29, 2024

What would you list as your most valuable asset?  Your home?  Your business?  401k?  Life insurance?

While these things can all be very valuable assets, they're not the most valuable.  Think about this:  You have one asset that gives life to all of these other assets.  It is your ability to earn a paycheck.  If you got sick or injured and were unable to work, all these other things are suddenly going to be difficult to hold on to.  If you can't make your mortgage payment or pay your property taxes, you can find your home being foreclosed on.  How well will your business function if you're not there to lead it?  You can't put money into a 401k if you don't have a job.  And unless you have a disability waiver rider on your life insurance policy, it could lapse if you can't continue to make the premium payments.

Now let's consider what you could replace if you had to.  Let's say you're 40 years old and earning $50,000 per year.  Your home is worth $250,000.  If your home burned down and you didn't have insurance, you've got enough working years left and enough income to buy a new home.  It would be very difficult and something to dread, but you could do it.  The thought of having to go through that is scary enough that you wouldn't think of not insuring your home.

If your business suffered a legal or financial catastrophe and you were forced to close it, you've got enough time to start over.  You would cringe at the thought of having to do that, but you could.  Again, it's a scary enough thought that you do everything possible to prevent that from happening, including purchasing business insurance.

If the market tanked and your 401k lost half its value, you've got enough time to wait for it to recover and even to continue contributing when shares can be bought at a discount.  You would probably lose some sleep over it, but you could get through it.

And if your life insurance company went belly up, you've still got time and income enough to buy another policy.  It would be sickening, but you could.

But if your ability to earn an income stopped tomorrow, you couldn't do any of these things, let alone all of them.  And the stakes are much higher.  With 25 more working years left, you're expecting to have $1,250,000 flow through your hands before you get to retirement age.  That you can't recover from.

Now let me ask you the most important question.  You're insuring your home, your business and your life, but are you insuring against the risk of losing your paycheck?  Can you really afford not to???  It makes little sense - buying personal disability insurance will guarantee about 2/3 of your income (tax-free) if you get sick or hurt for the cost of about 3% of your income while you're healthy.  Why in the world would you retain that risk yourself when you can transfer it to an insurance company for such a minimal cost?  Your spouse, your children, and all your respective current and future lifestyles deserve better than neglecting this issue.

After all, your ability to earn a paycheck is your most valuable asset.