Rising insurance cost prompts re-think
Frustrated by a roughly 40 per cent increase in his Auckland house insurance premiums since the Canterbury earthquakes, one reader wrote to tell me that after 37 years he and his wife decided not to renew his cover.
As a couple with no mortgage in their late middle age, of quiet dispositions and orderly routines, they feel the risk is low.
He says: ‘‘We do not smoke, my wife does not drink at all while I enjoy a beer or a glass of wine.
‘‘I am never even mildly drunk, we do not have mental health issues, abuse drugs, have wild parties, argue loudly or exhibit other manifestations of chaotic lifestyles.’’
They’ve never been burgled. Never had a speeding ticket.
The big risks they see include fire and earthquakes but both unlikely and they live in a wooden bungalow that was ‘‘built to withstand earthquakes’’, and even if it happened, most of the value is in the land anyway. My response? Horror, but tinged with envy.
In my line of work you hear of catastrophic losses almost every day and unlike the couple who wrote in, I have kids, random beings capable of random acts of silliness.
I remember drying my school socks under the grill one morning when still a snotty schoolboy and forgetting them. Close one, that! Also the house is the centre of family life, fixed in our school zone, among our friends, and is one of our biggest stores of inter-generational wealth. It has to be insured. But there are some options of reducing premiums. AA Insurance laid out the options:
1. Shop around: between insurers.
2. Call the insurer: It may be possible to get a discount from the insurer, if you take other insurance to them too, though this makes it a bigger job to shift insurer at a later date.
3. Increase your excess: Take the owner of an average 1950s three-bedroom brick home with a sum insured figure of $395,000, which means your annual premium with AA Insurance is about $827, with a standard excess of $400.
By increasing your excess to $1000, your premium will reduce by $140 to about $685.
4. Decide to drop the sum assured: A homeowner could decide to under-insure their home, and put up with having to replace it with a smaller one should it be destroyed.
But that won’t save enough to justify the extra risk.
AA Insurance said in many cases it cost only about an extra $40 a year for $100,000 of extra cover.
5. Shift to ‘‘defined events’’ cover: Defined events is a limited cover which protects for loss or damage caused by specific events such as fire, lightning, storm, flood, burglary by violent or forced entry, malicious damage, and natural disasters.
Unlike accidental damage cover, which is the most comprehensive type of house cover, defined events does not cover smaller accidents around your home such as a burst pipe or damaged carpets.
Such a policy would cost about $713 with a $400 excess or about $600 with a $1000 excess.