Luke Milholland CFP®,ChFC®,CLU®
Income Protection

What’s your greatest asset? Your House? Your 401(k)? Regardless of how much you have accumulated, if you are under 40 years old chances are high that your greatest asset is actually your income.

This is true for two primary reasons:

  1. The economic future value of your income likely far outweighs all your current assets combined.
  2. If you made a list of all of your goals, chances are high that they all depend on one common thing - your ability to produce an income.  

Let’s take a married couple ages 37 and 34 years old with a household income of $250,000, whose balance sheet looks something like this:

Now let’s assume that their $250,000 household income is comprised of his $100,000 salary and her $150,000 income from her business.  

Just to keep the math simple let’s assume they both plan to work another 30 years. Not accounting for inflation or pay raises, they will earn $3,000,000 and $4,500,000 respectively over their remaining working years. That’s a total of $7,500,000 over 30 years.

For perspective, a $200,000 net worth would have to grow at a rate of about 13% per year to reach $7,500,000 in 30 years.

The longer they work (with fewer working years ahead) and the more assets they accumulate the smaller the discrepancy between Projected Net Worth and Future Earning Potential becomes. Until then however, the attainment of their hopes, dreams, and goals are highly dependent on the continuation of their earned income.  

This is why it’s imperative from a strategic financial planning perspective to protect your income while you diligently build passive and portfolio income sources.

The ability to continue producing income is the lifeblood of not only achieving future goals but to sustaining current lifestyle.

So what “threats” to income should you be concerned about guarding against? While there are a myriad of potentialities that could derail your ability to earn income, there are three we’ll focus on in the scope of this article. Those three are unemployment, disability, and death.


Perhaps you're in a dying industry or a company that is downsizing. Whatever the reason, if you earn your income working for someone else, there is always the potential risk of unemployment.  

If you happen to know your company is downsizing or that your industry is shrinking or being outsourced, it might be prudent to begin making contingency plans. Unfortunately, sometimes unemployment comes out of the blue.

Having adequate savings is important to weather this sort of event. There are also government programs that assist during times of unemployment. These programs are temporary in nature, but can help bridge the gap between jobs.  

Whatever the case may be, unemployment do to a lay-off will hopefully be short lived.  

Two potentially more ruinous threats are disability or death.  


Disability in this context simply means being sick or injured in such a way that you are no longer able to earn an income.  

Sometimes a disabling event is short term in nature lasting a few months or even a couple years. Some disabilities may last a lifetime.  

Whether short term or long term, many of us would not be able to continue our current existence without an earned income. So how do you protect your income against the possibility of disability?

Disability Income Insurance (DI). DI is a special kind of insurance policy that covers your income and would pay a monthly benefit in the event of a disabling sickness or injury.


It may seem obvious that if you died, your ability to earn an income goes away. Why is this important? If you are single with no dependents and have zero debt, it may not be. Conversely, if you have a spouse, dependents, or debt  it may be critically important. Maybe not to you, but to your dependents.  

If your family household depends on your ability to earn an income and all of a sudden it was gone, that could provide a devastating financial blow at an emotionally terrible time.

Life insurance is an easy fix to the potential risk.


As a general risk management principle, you want to insure things that you can’t afford to lose.  

If you can get along just fine without earning an income, then great! No need to worry. You have achieved financial independence (or at least some level thereof)!

However, if you’d be in a real predicament in the event you lost your income then it is time to take action.  

Develop a game plan to mitigate potential threats to your income and use insurance to offload risks that would be devastating to your family’s finances, heaven forbid one occurred.  


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