Philip Holland Financial Independence financialindependence

Murphy's Law is an old adage that is typically stated as, ‘Anything that can go wrong, will go wrong'.

We all know our friend Murphy and you have probably experienced Murphy's Law first hand. We saw an example on SunLive last week of a young guy who crashed his Jag into a Ford XR6 the day after he cancelled his insurance...now that's Murphy's Law!

Insurance is one of the best ways to cover yourself against Murphy's Law. In the case of this young man, he may have saved a few dollars by cancelling his insurance policy, but after Murphy took aim he would have been in debt to the tune of well over $20,000.

We had another example last week of a large business in Christchurch which cancelled its earthquake cover one month before the big quake. They cancelled the cover to save a few about $70000. However the earthquake destroyed one of their buildings worth over $1.5 million! This makes the saving from cancelling the insurance look very small.

So what are the lessons to be learnt from our mutual friend Murphy?

Well the first is that Murphy's Law really does exist as ‘Anything that can go wrong will go wrong'. Make sure that you keep Murphy in the back of your mind next time you decide to cancel your insurance or go for a long car trip without a spare tyre!

Obviously you can't insure yourself against every possible Murphy-type outcome, nor may you be able to afford all the insurance available. It is therefore important to know and be aware of the risks you are insuring yourself against.

If you do not have life insurance you are saying that if you died, no-one would require further funds. If you are not insuring your income, you are saying you have sufficient assets available to fund your income until you depart this world.

If you do not insure your car ,then you can afford to replace your car and the new 2011 Bentley Mulsanne worth about $360,000 that you may crash into!

Murphy is alive and kicking and is looking for new victims every second of the day. How well prepared are you to face the wrath of Murphy?

Philip Holland is the Managing Director for the Financial Independence group, Tauranga's leading specialist insurance and mortgage advisers. For further information please contact an adviser at Financial Independence 578 4414 or email info@yourbroker.co.nz. A Disclosure Statement is available free of charge on request.