Ris­ing in­sur­ance cost prompts re-think

Auckland City Harbour News - - NEWS -

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.

Prices vary

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.

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