Elon Musk is one of the world's richest person. The 45-year old self-made billionaire is estimated to have a value of USD $11.7 billion. He is the individual that actor Robert Downey Jr modelled after when he was playing the function of Tony Stark within the Iron Man film series.
For those people who are not familiar with Elon Musk, you might recognise the companies he owns, or used to own.
Paypal & Zip2
Elon Musk was the former CEO and co-founder of Paypal, a company that was sold in 2002 to eBay for USD $1.5 billion. Elon received USD $180 million in the sale of eBay, giving him the financial muscle to pursue other passions in life. Prior to Paypal, Elon also sold his first company Zip2 for USD $307 million, which netted him USD $22 million.
SpaceX & Tesla Motors
After his PayPal days, Elon Musk went on to start and fund two high-risk, high-profile companies, SpaceX and Tesla Motors.
SpaceX builds rockets and space crafts and sends them to space. The mission of SpaceX would be to produce the necessary technology for space travel that would eventually let the colonisation of Mars.
His other company, Tesla Motors, would be more familiar to all of us. Tesla designs, manufactures, and sells electric cars. The company hopes to build affordable electric cars for individuals all over the world to own and drive.
The bulk of Elon Musk's value today is derived from his ownership of both of these valuable companies. No matter how you look at it, Elon Musk is an extremely rich person.
Do Rich People Need Insurance?
One common misconception that people sometimes have is the fact that rich people like Elon Musk wouldn't need insurance. But that's not true. Everybody need to be insured, just not through the same plans that average joes like us need.
The logic behind this (incorrect) thinking is that if you are rich enough with plenty of liquid assets, then insurance coverage is unnecessary since you can “insure yourself” by making certain you have enough to pay for the needs of yourself and your loved ones if unforeseen circumstances strike.
For example, an accident occurring may prevent an individual from working for annually because he or she recovers from it.
An income protection plan is needed to pay for that damages, this is particularly important if you're a self-employed person such as an entrepreneur (much like Elon Musk), and insurance agent (the irony) or perhaps Uber driver.
For a person like Elon Musk, the need for earnings protection plan's not important. That is because we're pretty sure if Elon Musk decides to quit employed by a year, he would have other sources of income that he can rely on. For your information, Elon Musk's basic wages are under $40,000 per year. Likewise, an individual who already has sufficient residual income (e.g. $10,000 per month) may not need such an insurance policy.
The other common scenario would be life insurance coverage. For those who have enough income-generating assets, the need for life insurance reduces as your dependents can nonetheless be taken care off through the assets that you already have.
This brings about the thinking that rich people don't need insurance.
But if rich people does indeed not require insurance, then why are a few of the richest and many famous personalities on the planet also the same people that have gotten probably the most quantity of personal insurance?
The the fact is that rich people do need insurance, simply not the ones that we commonly go for.
Why Rich People Likewise need Insurance
David Beckham's legs were at one point insured for anything between $70 million and $100 million. This is because simple. David Beckham earned the majority of his income from his soccer skills around the pitch and the subsequent endorsements such as the following it.
A career-ending injury during his prime would have led to an enormous lack of future income for David and the family. Thankfully, that did not happen and Beckham retired gracefully in the age of 38. He's still making millions each year from his endorsements.
Other personalities that have bought multi-million personal insurances on their own body (or parts of the body) include Jennifer Lopez, Daniel Craig, and Cristiano Ronaldo.
The idea is the fact that even rich people buy insurance to ensure coverage for his or her most prized assets that help them generate profits.
Even SpaceX Rockets Need Insurance
Not surprisingly, sending a rocket into space is really expensive. SpaceX charges between USD $62 million and USD $80 million to produce each rocket. This excludes any other equipment including any accompanying satellite.
What we might not realise is that even with technological advancement recently, launching a rocket into space is a risky proposition. A CNBC article reported that on average, One in 20 launches would fail.
The recent SpaceX Falcon explosion might have blown up, literally, several hundred million dollars price of investments. This would include the SpaceX Falcon rocket, as well as the satellite which was intended to be sent into space, which was for use by Facebook.
Insurance would cover some or all of the price of an investment lost. If we assume each launch is insured for around $200 million, and that we possess a One in 20 possibility of failure, then the minimum premium to be charged by insurance companies for every launch could be $10 million, probably more.
It's expensive, but hey, launching space crafts into space is a risky and expensive business, and paying $10 million (or more) to insure your rockets and satellites could possibly be much better than being worried about them blowing up before you without any insurance coverage.
Insure The Things That Are Important To You
For most us employed people, we buy insurance to insure our health and life. This is our greatest profitable asset because we need a proper life to remain gainfully employed and to earn a living for our families and ourselves.
For individuals with investments, insurance might be obtained to protect our assets. For instance, we would buy fire insurance to pay for the properties that we own.
Business owners for example Elon Musk would buy insurances to safeguard their business assets. This might include protecting expensive machines and equipment against fire, damages or perhaps theft.
For some companies, they might also insure themselves from the chance of losing a vital personnel. A listed company may insure its Ceo (CEO), ensuring a payout will be given to the company should something happen to their CEO.
The idea is that different types of insurances are purchased to protect the assets that help us generate income. For some people, this is most practical by means of a health and life insurance. For other people, it could be insurance on our properties or businesses.
And unlike popular thinking, it's the rich people or the rich companies, that may absolutely need insurances most.
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