How high earners can protect their income and net worth

December 3, 2023

Everyone loves to talk about getting rich – it’s the exciting part of wealth building.

We rush to click on headlines like:

  • How to double your income in 2 years.
  • How this 27-year-old used real estate to retire.
  • The key to launching and growing a successful business from your phone.

After all, we build empires by mastering skills like these.

But as history shows, empires can also crumble.

Conflict, mismanagement, and greed will rapidly wipe out what took decades to build.

Early death, disability, lawsuits are regular topics I have to bring up to my clients.

These scenarios are not only unpleasant to think about but they're also uninteresting because:

1) Protecting wealth is not as fun as building wealth, and

2) These scenarios seem so unlikely.

And for the most part - these events are unlikely.

If you are 30, you are more like to continue living for the next 10 years than you are to die in the next 10 years.

But it is not outside of the realm of possibilities.

Today's young workers have a 1 in 3 chance of becoming disabled or dying before they reach retirement age (read here).

So, if we want to protect our wealth and protect those who rely on us, we have to consider these scenarios.

Almost everyone needs insurance to protect their wealth & their income.

Especially high-earners.

But most people have no idea they are severely underinsured.

This could have devastating consequences.

So, today we are going to look at three types of insurance that protect your income, your wealth, and your family.

3 Types of Insurance to Protect Your Income, Wealth, and Family

1. Life Insurance 👨‍👨‍👧‍👧

This insurance protects anyone who relies on your income or your work.

The rule of thumb is 10x living expenses, but you may want to also consider insuring for:

  • Outstanding debt (mortgage, auto loan, student loans).
  • Retirement needs (so your spouse can comfortably retire).
  • Education funding for your children.
  • Funeral expenses.

And consider insuring both spouses even if one is the stay-at-home spouse.

You can easily translate the homemaker's value to dollars: cost of childcare, cost of cooking, cost of cleaning, etc.

These tasks won’t disappear, so consider the increased costs if something were to happen to the homemaker spouse.

There are two common types of life insurance: whole life (permanent) and term life (temporary).

As your net worth grows, and your children graduate college, your need for life insurance will shrink.

This is why most people would be better off buying the temporary & cheaper insurance (term) and investing the difference in other accounts.

2) Disability Insurance 🩹

You are far more likely to become disabled than you are to die early.

But life insurance gets all the attention (thanks to the large commission it generates for the insurance agent) while disability insurance is often ignored.

There are two types of disability insurance:

Short-term: benefits last ~ 3-6 months.

Long-term: benefits last anywhere from ~2 years to life.

If you have a well-funded emergency fund, you may be able to skip short-term disability insurance.

The important thing to pay attention to with this type of insurance is the wording.

Commonly there is either “any occupation” or “own occupation” coverage.

Any occupation will pay out if you are unable to work in ANY job you are reasonably qualified for.

So, if you’re a brain surgeon and lose function in your hands, the insurance company may argue that you are reasonably qualified to work the front desk.

Even if it means a massive reduction in your income.

If you’re a professional or a specialist, you typically want coverage called “own occupation”

Own occupation will pay out if you are unable to work in the role you were working in prior to your disability.

Own occupation is more expensive but often worth it.

3) Umbrella Insurance ☔

This insurance provides an extra layer of protection by sitting on top of your existing auto and home insurance policies.

It's unlikely you will be in a lawsuit that your other insurance can't cover.

But this insurance provides peace of mind for that worst-case scenario.

And the great thing about it is that it's usually pretty cheap.

An important part of umbrella insurance is that it can cover both you and your family.

If your child is sued, this insurance could step in.

If your dog attacks your neighbor, this could step in.

If you're in a huge car accident, and your auto insurance doesn't have enough coverage, this could step in.

This insurance is something you look into as your income and net worth grow. It's usually unnecessary when you are first starting out and income/net worth is low.


Your best case scenario is using your insurance premiums to pay for peace of mind.

The worst case scenario is someday having to rely on the insurance to save you and your family.

Worst case scenarios do happen. This is why we have to proactively plan for them.

The three types of insurance to protect your earnings, your net worth, and you & your family:

  1. Life Insurance
  2. Disability Insurance
  3. Umbrella Insurance