The Most Valuable Asset

What is the most valuable asset you have?

Anytime I ask someone what is the most important asset they own, they usually say their house. In most cases their answer is correct, if you are simply looking at the most valuable asset in their portfolio. However, the real answer in almost every case is much different — it is their ability to make money.

Are you surprised?  If you are in this business, you shouldn’t be. 

Let’s say you are 35 years old and earn $40,000 a year. If you work until age 65 and you never get another raise, you will earn $1.2 million over the next 30 years. If you do get occasional raises and maybe a few promotions along the way, this number could be much higher. Your income earning potential is certainly worth a lot more than a $400,000 house. 

See also: A Hard Pill to Swallow

Now, here’s the interesting part of the story. Everyone I meet insures his or her house and car. It just seems natural to do so.  However, I am always surprised to learn when people — even some new  financial professionals — don’t insure their ability to earn a paycheck. If you are the most valuable asset in your family, why don’t you insure your earning ability?

The fact is, the chance of becoming disabled before age 65 is 1 in 4, according to a March 18, 2011, federal Social Security Fact Sheet.