Insurance Renewal – Home and Contents

Earlier this month I had the pleasure of renewing my home and contents insurance. I know most people won’t consider it a pleasure to pay for something you hope you will never need, but I did. There are two main reasons for this, firstly insurance is important, secondly because I got a discount. Let me tell you a little about two events that gave me a smile.

Why Insurance?

Insurance is extremely important. I never fully appreciated it until I had my first (and only) uninsured car crash. Thankfully it wasn’t too bad or too expensive. However it caused a possibility to loom large in my mind. What if it had been a bigger crash? What if the other car was not an old Mazda, but a new BMW? This possibility caused me to get car insurance (more on that in a bit).

This accident happened around the same time that a previous financial mentor spelled out the reasoning for insurance in a way that others had never managed to do. I will attempt to repeat it here, but probably wont do it justice. What he said was extremely simple. It all seems so basic now that I work in operational risk, but back 20 years ago it was eye opening. He said:

“Everything you own or do that you can’t afford to lose needs insurance. You either buy it from someone, or from your future self”.

Lightning bolt! It instantly explained and put in order all the thoughts that were whirling around my head around insurance. I knew why I didn’t care about insuring my car, but why I did care about other peoples cars. I also knew why I didn’t care about life insurance, but did care about TPD (total permanent disability) insurance.

There are many things people own or do that could have something go wrong. Some are repairable (like a car crash), some are not, (like losing a leg) but all of them have a financial impact. Insurance is about how you will meet that financial impact.

I now have three categories that I use for insurance:

1. Don’t Care About It

Anything that I don’t care about losing, or having something bad happen to, I don’t insure at all. This category includes anything where if an item was lost I would not replace it. This also includes things that cannot be replaced and have no real monetary value (eg: sentimental value).

Examples:

• my old tape/CD collection,
• various unimportant ornaments displayed on shelves,
• old paper note books from courses I have taken,
• love letters from current and previous partners etc.

2. Self Insure

Anything I can and am willing to pay to fix or replace myself falls in here. This is normally the largest category by far. It includes everything you never think about because if it broke you would just buy another one. The emergency fund many people recommend having is primarily designed to cover the larger aspects of items in this category. You do have an emergency fun, don’t you?

Examples:

• my old car (I only got third party property because I was will to buy another old bomb),
• TV and DVD player,
• laptop,
• my pets (if they died, see below for health),
• tables,
• chairs,
• dishwasher,
• domestic travel events (e.g. lost luggage),
• the cost of my funeral,
• an ice cream I am eating when it falls on the ground,
• lightbulbs etc.

3. Buy Insurance

This is normally what people talk about when they talk insurance. It is anything that you can’t, or choose not to pay for if something goes wrong. Previous I put down “my TV” as things I would self insure. I can easily afford a new TV if something goes wrong. However I wouldn’t want that to happen for everything in my house at the same time. That is why I have contents insurance configured for my needs; I have a large excess so that if a single item breaks, it is not worth claiming (I self insure), but if lots of things broke, or were stolen, then that is something I do not want to self insure against.

Examples:

• house and contents (read the PDS carefully if you are using sharing services like Airbnb),
• travel (international),
• pet medical,
• car insurance (now that I have a more expensive car),
• income protection,
• TPD,
• medical insurance (even if you don’t have private medical, your tax pays for medicare, the government has decided you must have medical),
• compulsory third party (again, if you drive you must insure any people you crash into),
• life insurance.

Ask for a Discount!

Now that you know how I see insurance, back to my home and contents renewal.

My renewal notice came, and I did a few comparison quotes, like I do every time. This was the first time in a number of years I did not find anything cheaper (well, within a “do I actually care enough about the price difference to check the PDS for differences in exclusions”). However I did find a small error in the details I had listed for the house. While I didn’t think it would change anything, I thought it was a good excuse to call them and ask for a discount at the same time.

So I called AAMI (no affiliation, sponsorship etc, just impressed enough I wanted to name drop), had the detail updated and said “while I have you on the phone, how about a discount?”. I also dropped in the prices of some of the other insurance quotes.

Of course I was expecting to hear “no, sorry”. However after checking over some other details, she said “let’s see if we can beat those other companies”. After about 10 seconds of muffled typing, that could easily have been just for show, she offered me an additional 5% ish discount. That brought the price below every one of their competitors, and saved me a bunch of work reading other PDS’s.

All this took about 5 minutes, which works out to over $1000 per hour. Not to shabby for just asking for a discount!