This is a piece we wrote for the Sunday Independent (originally appeared on the 4th of May).
We buy insurance to protect something we own or value. When asked, ‘What is your greatest asset?’ many people will say their family home; the more enlightened might say it’s their health.
Wealth is clearly something which many of us value – however, some people incorrectly mistake their income for wealth.
Cashflow can have endless liabilities stacked against it, which is why believing a person making six figures is ‘wealthy’ is often wrong – when viewed in the totality of their financial position.
Assets minus liabilities equals wealth – that’s a basic accounting equation.
It’s important to have a good understanding of wealth and of what you value before buying insurance. You should also ask yourself if the insurance in question is worthwhile.
The principle of indemnity is that you can’t be insured beyond the loss you experience, and there is always the issue of the cost of insurance versus the risk of the …