Have you protected your most valuable asset?

You insure your car, don’t you?

Most people insure their motor vehicles, their homes and their home contents. These are valuable assets that, in the event of various catastrophes, they want to be able to replace or repair without significant financial loss.

But when it comes to what is many people’s most valuable asset – their ability to earn future income – they are woefully positioned to cope financially with catastrophe. Research completed in 2006 indicated that only 55% of Australian families had any life insurance, with an even lower 31% having income protection.
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Borrowing to Invest or Super?

I don’t want to lock my money into super

Two alternative strategies that many investors consider are:

• borrowing to invest (i.e. entering into a gearing strategy), outside super; and
• increasing pre-tax contributions to super and investing in the superannuation environment.

Which is best? The comparison is not straightforward, but is often hijacked by raising the issue that your money is “locked away” in super. For those some years away from being able to access their super, this is often a compelling point in favour of gearing.
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