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That would be the fastest way to clear a room. “Hey, come sit with me, I want to talk to you about insurance...”
Earlier this week I got an email saying nice things about my blog and then asking “I would like to have your opinion on insurances - in particular Life, Income Protection, Trauma Cover, Total and Permanent Disability. My wife and I pay significant amounts by the time everything is added up. Jared”
So, here comes my opinion because I’m sure as heck no insurance advisor!
I’m hearing you Jared! As luck would have it I’ve been reviewing our insurance over the last month because for a low income household insurance makes up a big chunk of our monthly spend too. All of these premiums add up to:
$7,425 per year
$620 a month
$143 per week.
Gasp! Flippin heck huh!
Just like with banks, which I have ZERO loyalty to, its the same with insurers. We are currently insured with four different providers because it has better synergy for us. I’m not going to list them but they are all mainstream insurance companies. Just so you know, I am PRO insurance, but it is really worth the exercise to review it every year or two to make sure we are not under or over covered.
My family of three is insured for heaps:
- Car insurance x 2
- House insurance x1
- Contents in insurance x1
- Health insurance x 3
- Trauma cover x 3
- Life insurance x 3
We used to have income protection insurance until our incomes got too small to be worth protecting! When my husband was part of a company he was insured up the whazoo.
I began with our health insurance. The first big company I worked for out of university offered health insurance to myself and my husband. By signing up with them we got a cheaper policy and over the years we have continued that on from job to job, always sticking with the same insurer. When our daughter came along she got added to the policy. But the problem for us and the benefit to them is we are (touch wood) very healthy and we rarely go to the doctor these days. Our policy covered many doctor visits a year and prescriptions as well. So, I cut our policy back to hospital and specialist care only and we now pay $103 per month for all three of us, saving $53 per month/$635 per year. American subscribers, I have not made a typo here! We arguably have a strong public health system. Just one of the many things that makes New Zealand awesome.
Next I was prompted to act again when I received our ‘annual policy update’ for the two cars we drive. The excess went up to $400 with no explanation, so of course I rang them for that explanation.
“Ruth, you just have to understand how hard it is for insurance companies these days, cars are SO EXPENSIVE to fix so we have to charge you a higher premium AND excess to encourage you NOT TO CLAIM”. She explained in detailed dollar terms how much a new windscreen costs to fix on an Audi. Whaattt? I drive a Mazda. My heart bleeds for them, it really does. It was like talking to an anti-insurance company and as hard as she tried I could not manage to conjure up a single piece of sympathy for the poor insurer. Of course they don’t want me to claim, they don’t want to pay out.
Tragedy has struck our cars many times over the years:
My first car was stolen and written off on a joyride up Mount Cargill in Dunedin
My second car was used as a safety barrier to stop a car slipping on ice on Highgate in Dunedin and was written off
Car was broken into and my gear nicked in Waitati
Car was broken into and my gear nicked in Tutukaka
My current car was backed into here in Central Otago
My husbands ute was maliciously damaged just two months ago
Even though they tried no one EVER managed to wreck my Lada! They tried to steal it once but broke THEIR screwdriver in the door lock. That Lada was awesome and I won’t hear a bad word said about it! And I sold it for more than I paid!
Each incident left us out of pocket and often without a car for a while. This annoyed me. I got a quote from another insurer to compare but basically they were offering the same as my current insurer and it made no sense to change. So, after a bit of back and forth we have decided to pay MORE for our insurance, another $11 per month, to lower our excess down to $100. HOWEVER, now that I have made this change ‘Murphy’s Law” dictates that we will sail through the next five years with no incidents!
Sometimes I’m OK (I won’t say happy) to spend a little more if we get the cover we need.
Contents insurance was a tough one. I’ve entered the minimalist phase of life and when I look around there is not much stuff that I would miss if I lost the lot and I was keen to really reduce the cover. I personally know a couple of people who have lost their homes to fire and while I could live without my nicknacks, the fact remains contents cover does cover so much more than just your TV. Such as my oven, carpet, curtains, beds and computers; things that are essential (to us at least). So, after doing a walk around with a calculator adding things up that we would want to replace I’m retaining our $90K of cover.
I am currently typing away in a house that my insurer built. We lost our house in the Christchurch earthquakes and I would not be sitting in this one today if not for the insurance cover that we had. But if you think the paperwork to make this happen was easy, think again. Ask any person in New Zealand affected by earthquakes in the last six years and most will tell you that dealing with an insurance company was/is a nightmare. The single most stressful period of our lives. Our claim took about two and a half years to be paid out. In the back of my mind when dealing with insurance is always the supposition that it is their job to get the best outcome for them, no matter what their shiny adverts say about being there for YOU.
Over the years our friendly life insurance “relationship manager” got in touch and bit by bit we were insured for more and more AND more and our premiums reflected this. Although he is a really nice guy to chat with, never be fooled by this: they make a living out of selling insurance, the more the better. If I had died then my husband would have been an instant millionaire and vice versa. We had $1,000,000 worth of cover which made us feel really safe. But come on, what’s with that? I think it served our egos first and foremost to think we could be ‘worth’ that amount! It’s a shame that one of us would have to be dead to get it. So, two years ago we halved our cover, reduced our premiums and invested what we saved. Now, I’m looking at it again and thinking, do we need it at all? Is it time to ‘self insure’?
The Christchurch earthquakes were a very good test of how much cash in the bank is enough. After the earthquakes hit the following things happened:
Our home was uncertain - still standing but no services to use. We left it for several weeks.
My husbands job was uncertain - they could not go back into the building. Would there still be a job for him?
But as I’ve talked about way back in another blog I knew we had enough emergency money aside to pay the bills and feed ourselves until we got back on our feet. And that position has only strengthened over the last couple of years.
If, god forbid, one of us died, I can say with confidence “We’ve got this. We will be OK”. We won’t be financially ruined if one of us dies and although it is a hard conversation to have we have talked about our options if one of us does. It gives me a lump in my throat just thinking about it.
When I received the email from Jared the above was the scenario that was going through my head as we tried to make the right decision regarding our life insurance. I went out running and I came up with this stunning running/insurance analogy:
It is a very frosty morning outside so if I want to get out there running I need to layer up for a bit of protection from the elements.
Three merino long sleeved tops, leggings, warm hat, warm gloves, thicker socks AND gaiters to stop cold air and pebbles getting in around the tops of my shoes. And my beautiful dog for additional protection.
I have to wear so much because at the start of a run my body is too cold to look after itself and keep me warm.
I needed the additional protection/insurance against the cold.
But the further I ran, the warmer I got and bit by bit I got warm enough to start peeling off the layers.
Firstly one top, 10 minutes later, my gloves came off, 10 minutes later my hat.
Until finally I ended up with a comfortable layer of clothing on for me to continue running in.
Insurance is like that.
You need to protect yourself with a certain level of cover, but as your situation changes you may find the need to remove some.
There will always be a baseline level of clothing/insurance to keep so you don’t end up running around the hills naked! NO ONE wants to see that I can assure you.
How is that for an analogy? It is times like this that I wish I had an editor to refine my thought processes!
So, long story short, we are stopping our life insurance. We have enough saved to cover ourselves if one of us pops their clogs.
That leaves us with our final insurance cover. We are keeping our trauma cover which covers us if we suffer from something that doesn’t kill us but instead makes us very ill, such as cancer, losing a limb etc. It’s more likely that in our lifetime we will suffer some debilitating illness instead of simply dropping dead.
How do our premiums look now?
After reducing the health insurance, stopping the life cover and increasing the excess on our cars going forward we will now pay approximately:
$6,020 per year
$500 a month
$115 per week.
That is about $1,400 less than what we have been paying.
It’s still a decent chunk of change to insure ourselves for something that will hopefully never happen... but it just might. The money we have saved will be invested somewhere else but this exercise was not about saving money - if it was I would have cancelled the lot. But that would be crazy la la, I want some cover, it is just a matter of finding the correct amount. For now I think we have found it. Jared, I’m not sure how your numbers compare but this at least gives you something to compare them to?
Whatever your situation it’s important to take a look every year or two at your level of insurance cover. It bores me to have to do it if I’m honest because it always means looking over documents which are designed to be confusing. Plus, it involves me having to make phone calls, wait for new policy documents to arrive, ask questions and so on. It ALWAYS takes longer than you think it will. But once it is done I’m pleased I did it.
I’m heading out for a run shortly, fingers crossed I don’t trip on a rock and break my leg!
I hope I haven't just jinxed myself…