How many cups of coffee is peace of mind worth?

Posted on Updated on

My heart goes out to the victims of Mother Nature’s rough side: floods, fires, cyclones, hurricanes, earthquakes, tsunami, pestilence, you name it… but I’ll be blunt here, if you can afford to own a house, or at least be making the repayments, you can afford to insure it. Let me put it another way. You can’t afford not to.

Should disaster strike, yes, if you’re entitled to relief funds to cover some of your costs take your share but consider those who are in direr straits than you…

Philosopher Mouse of the Hedge recently posted Muse or Mushhead?, touching on aspects of disaster assistance. PMOTH’s response to my comment was “Your response should be a major blog post. It’s all the truth. Thanks so much for taking time to build it to such perfection.”

Below is my comment, and yes, by sheer length alone could be classed as a blog post…

“Great post, and valuable information. I feel terribly sorry for people who lose their homes due to any sort of disaster and I know it’s not a perfect commodity but you’re so far better off with house insurance than without it. It’s all about personal responsibility. In the last few years our house & contents insurance premium has increased by 350 % due to recent fire and flood disaster claims, and a change in the regulations around flood damage so policy holders are effectively covered without loopholes or gaps.

6 years ago we had a claim when the back outdoor area of our roof was blown by a mini tornado on to the house roof and also destabilised the framework of our outdoor area… Without that insurance policy we’d have been out of pocket thousands & thousands of dollars, trying to find contractors and may have suffered further loss… because the insurance company was worried with forecast summer rain the damaged roof would leak and damage the recently renovated interior of the 80+ year old house, so the work was completed in 25 days… in a rural area were we often have trouble getting contractors to ‘come out’… Ours was a simple, non traumatic lesson… if you can’t afford to lose your house, or the ability to live in it, you can’t afford to be without house insurance. If my old age pensioner mother-in-law can budget to afford it, anyone can.”

But wait… there’s more…

Our ‘disaster’ was mild, memorable and the best birthday present I’ve ever received. We’d already made plans for the G.O. with a mate during our holidays to paint our house roof at Taylors Arm to extend its life. When the same mate called with the news that half the back roof was on the front roof, the other half was in a neighbour’s back yard, and the State Emergency Service in order to make safe the loose sheets of iron were in the process of stomping over what was left…

I harbored misgivings at the thought of navigating the insurance claim process but well… you can’t look a gift horse in the mouth, can you? So, in I plunged, expecting the worst.

To my surprise, through a series of fortunate circumstances: local claim assessor 20 minutes up the road experienced the same mini tornado which took out his knock up shed; helpful claims processors in local region; forecast summer rain; and great tradies – especially the carpenters & roofers… by the time we arrived 2 days before Christmas, they were finishing up. That’s right, other than an initial quick visit, we weren’t on-site to manage any of it. I did it all over the phone & via email.

I know we had a beneficial context, there weren’t thousands of other claims going through and the insurance company recognised the potential & their liability for risk of further damage so mobilised resources quickly.

In a different and again non serious situation, my aunt and uncle who live nearby had a hail damage claim to a shed and awning that took 6+ months to finalise because it was low priority, during which time another hail storm did more damage, so the insurance company got lucky there.

I know the insurance company processes have a reputation as onerous and inefficient but I believe at critical times they work loosely on a triage basis, and while it may make little sense to us dealing with the micro of the fallout, they prioritise with a macro view of who needs when and how with what is available, but I grant of course, with one eye on shareholder dividends.

There is one point to all this… we had insurance cover. No matter how long it takes, if you have sufficient cover that is appropriate for your situation, at the end of the day you will get the help you’ve paid for. At the time of our claim we’d been paying for a year a premium that cost us per month less than the equivalent of 14 large takeaway coffees. Between then and now it’s risen to the cost of 48 large takeaway coffees.

Had we not had insurance cover, it would have cost us the equivalent of 5,714 to 8,571 large takeaway coffees to repair the damage ourselves when we were able to arrange contractors… for which we’d have had to sacrifice our savings or borrow, and in the meantime we wouldn’t have been able to use the house as the power was shut off until the damage was repaired, and we’d have been hoping tarping the roof was sufficient to stop it leaking.

Even calculating ongoing insurance payments from then to now, the premiums have only added up to the equivalent of approx. 2,187 large takeaway coffees… which we look at as retro payment for the new roof, and an ongoing cost of the price of peace of mind.

Mini-tornado flattened whirly bird
Advertisements

34 thoughts on “How many cups of coffee is peace of mind worth?

    metan said:
    November 15, 2012 at 7:11 pm

    I completely agree with you. We are still organizing the shed to replace the one squashed by the neighbours tree, the delay being us, not the insurance company who have been surprisingly helpful. So glad to hear that your small disaster ended happily!

    We have insured the house since we moved in (15 years) and never considered the payments lost money. This claim is our first and boy, did we appreciate it. The tree squashed the shed a short time before we were due to go on holiday and to make it safe would have been all our holiday money gone. The insurance company got someone out a few days before we left to chop it into firewood and we left knowing we could get a new shed when we got back and not be at all out of pocket.

    After the Black Saturday fires here in Vic many people who lost everything had no insurance but due to the scale of the disaster all people who lost out were given a payout, insured or not. I can imagine the distress suffered by those people who lost everything but if my house burned down a few days later in an unrelated fire I am sure I would have been on my own. Being uninsured and part of a natural disaster doesn’t make you special, it just makes you irresponsible.

    Of course I have a special hate for the insurance companies that do their best to wiggle out of the payouts on some sort of technicality… grrrrr….

    Like

      EllaDee responded:
      November 16, 2012 at 3:04 pm

      I put myself in the positions of those who lost homes due to the fire & floods… and cannot bear to think about it, and how you would cope even with a payment but without insurance. I read Kinglake 350 and it really brought the bushfire reality home to me. While I was reading it one of the neighbours did a DIY burn off of the paddock behind us, on our behalf… I nearly lost the plot… but given the amount of fires already this season, maybe not such a bad idea. I’m sure some people don’t pay insurance because they don’t have any faith in the providers.

      Like

        metan said:
        November 16, 2012 at 8:20 pm

        After the Queensland floods debacle, where the insurance companies did their best to duck out of their responsibilities, it wouldn’t surprise me that people have lost faith in them. 😦

        Bushfires certainly are a scary thing. After Black Saturday we packed up and went and stayed in the camper in the MIL’s driveway for a week. Fires were burning on three sides of us (not too close but close enough to get showers of ash every day) and there is only one road out. I did check the insurance value of the house before we left, just to be sure we weren’t under insured!

        After that experience every summer has a new element of worry now. Hopefully no-one ever has to go through that again, but I think it is a vain hope.

        Like

          EllaDee responded:
          November 17, 2012 at 8:03 am

          Every place has it’s risks… I’m glad you were prepared and had somewhere to go. Lives are the most important thing to save.

          Like

    Celia @ Fig Jam and Lime Cordial said:
    November 15, 2012 at 7:24 pm

    ED, my friend Ellen wrote an excellent piece on the problem facing homeowners in low lying areas of Qld re house insurance. I agree with you about insurance and responsibility, but these people and many like them are really in a tough position – they have been given permission to build in areas which now cost them a fortune to insure. Most of them can’t afford it, nor do they now have any hope of selling their property. Ellen’s two-part article has been nominated for a Walkley Award.

    http://www.theglobalmail.org/feature/the-truth-is-in-the-flood-maps/236/

    In many situations, people in more risky situations simply can’t get insurance – the companies won’t deal with them. It often isn’t just a case of people saying they can’t afford it, sometimes despite their best efforts, companies simply won’t insure them, or will offer them a premium which is so exorbitant as to make the insurance meaningless.

    I’m a big believer in insurance – really I am – but I don’t believe it’s always as clear cut as simply saying homeowners should insure their properties, because many folks, through no fault of their own, simply can’t.

    Like

      EllaDee responded:
      November 16, 2012 at 3:05 pm

      Thanks Celia. This is a very good comment and an excellent article and I agree with everything she says, with only one exception “people living on the hill are not subsidising those living down beside the creek.” Our premiums have gone up 350% and when I queried it I was told it was due to the compulsory flood cover – we live on a hill and we’d need a fleet of Noah’s and arks if we ever were at risk of flooding from the river. I hope to get cheaper cover in the future and will be investigating our options but won’t be compromising on the cover we need, even if we have to pay a little more for something we don’t need. I do those feel very sorry for the people who are adversely affected, and given the risk and the unaffordability think they should at least have a get out option, which is still not the perfect solution. I don’t know if there is a perfect solution.

      Like

    dadirri7 said:
    November 15, 2012 at 7:39 pm

    i agree with you too elladee, insurance replaced the damaged roof on our redfern house a decade ago, when sydney was hit by a large hailstorm …. even here we have had our solar inverter replaced after it fused aged 10 years .. good deal!

    Like

      EllaDee responded:
      November 16, 2012 at 3:10 pm

      I’ve enjoyed the comments on this post, and was happy to hear of these good experiences. We lived in Darlington until August 2011 – I was there for 8 years, and I still miss the streets of the neighbourhood and Redfern even though we have only moved to the St Peters end of Erko 🙂

      Like

    Vicky said:
    November 15, 2012 at 9:11 pm

    While not on the grand scale of worldwide disasters, the recent flooding the UK has seen is still very traumatic for those involved.
    The spiralling problem now in a lot of those areas, is those who have had claims on insurance are being refused renewal until the government builds flood defences.
    So a complete catch 22, no defences, more possible flood damage with no insurance against it.

    There’s an interesting article here:

    http://www.telegraph.co.uk/finance/personalfinance/insurance/buildingsandcontent/9409406/Home-owners-in-flood-risk-areas-denied-insurance.html

    Like

      EllaDee responded:
      November 16, 2012 at 3:36 pm

      It’s pretty well up there on the scale of disasters… I think if the governent is holding things up they should step in to the gap until it’s resolved… an interesting thing I noted in the article is a flood excess which I would be happy to sign up for in return for reduced premiums.

      Like

    philosophermouseofthehedge said:
    November 16, 2012 at 5:21 am

    It is such a great post. I too have had pretty good luck with insurance company response. After disasters if you are being reasonable and have tried to take steps to keep further damage from occurring, they seem as easy to work with as possible. Some people do try to take advantage and make claims for items that didn’t actually own – and that makes it harder for everyone.
    The area that got slammed by Sandy was an old community(some of that valuable property has been in families and handed down) – new building standards (Florida and Texas) mean houses that can take a hurricane and rising water. Hope they enact these standards when they rebuild.
    Those that can’t afford to rebuild or just don’t want to will be able to sell their property (unless the state buys the property/makes new laws which isn’t likely) – probably for a good price. There’s always demand for property near water. And a fool and his money are easily parted?
    In any case. Insurance is well worth the money and make sure it covers wind and flooding.
    (really like the last picture – looks familiar!)
    Great post

    Like

      EllaDee responded:
      November 16, 2012 at 3:40 pm

      Thank you 🙂 I’ve enjoyed the comments, and found out some things I didn’t know. Yes, the proximity to waterways is really attractive, all being well. From time to time the G.O. looks wistfully at the old properties on the river in town, and I ask him “are you crazy?”… the combo of a king tide & heavy rain means certainty of flooding.

      Like

    robincoyle said:
    November 16, 2012 at 8:41 am

    I totally agree. If you are going to live in an area prone to natural disasters, which translates to the entire planet, insure your belongings.

    It also reminds me of people who buy a house near an airport and then complain about the noise.

    Like

      EllaDee responded:
      November 16, 2012 at 3:43 pm

      You’ve put it far more succinctly than me! And I agree, that lovely river frontage, the bush block… things I would love but I’m far too practical… and I’d hate to be a complainer when things went wrong.

      Like

    ChgoJohn said:
    November 16, 2012 at 5:39 pm

    I could not agree more. I do understand that homes built near a flood plain for example, are more affordable for many. Still, one shouldn’t be able to purchase one of those homes without good insurance. (We’ll talk about whether homes should even be there some other time.) But that’s stating the obvious. My city isn’t known for many natural disasters — other than Winter’s arrival every year 🙂 — but I’d never consider going a single day without insurance. That’s just plain irresponsible.

    Like

      EllaDee responded:
      November 16, 2012 at 7:20 pm

      Your’s is a good point… if at risk properties are made available, whose responsibility is it to foot the insurance responsibility, for it would be irresponsible to ignore the risk? It’s fortunate you are in a low risk area, and so were we but a line of trees was cleared on the next property along the river known for being a wind tunnel, and we’re not complaining, it got us a much needed new roof but thank goodness we had insurance. You never know.

      Like

    roughseasinthemed said:
    November 16, 2012 at 11:04 pm

    I saw your comment on PMOTH and nearly replied on there but luckily you have posted about it.

    I’ll echo Vicky’s comments and say that insurance in the UK is not as easy as everyone else around the world seems to find it to be.

    We went to ask about insuring the finca, this isn’t just a declaration of value, they actually inspect your property.

    In Gib, the insurer I went to see spent an hour explaining to me how insurance worked (to my intense annoyance). About the only thing useful he dinned into me was under-declaration.

    I’ve still to fill in the form. So call me irresponsible, living in a concrete block that is unlikely to suffer from fire damage (touch wood) and where all the furniture was left to me anyway. There is block insurance.

    In far too many years of paying house insurance we have made one claim which has been vastly exceeded by our payments. Perhaps an alternative view for a blog post from me?

    Like

      EllaDee responded:
      November 17, 2012 at 7:03 am

      I think an alternative view post would be interesting. I have enjoyed the comments and point of views that came from the comments on my post. If someone makes a judgement call after a cost-benefit analysis and decides not to go with insurance, fine by me, but it’s when after a disaster occurs, they then want assistance without having looked after themselves as part of their plan, that irks me, as with the case pointed out by PMOTH. It also irks me when people say “I didn’t think about it”, “I couldn’t afford it” (hence the price comparison to cups of coffee), “I forgot to pay the premium”… Because we’ve done our own cost-benefit analysis and it’s important to us to be self reliant, we happily pay the premium even though I think it’s too high and will be looking into getting it down without sacrificing necessary cover. I have no doubt in the end our costs will far outweigh our claims… I hope so anyway, and attribute some of the cost to the benefit of peace of mind.
      The article Vicky posted was interesting, and there are similar issues arising in Australia as there are newer development areas which possibly should have not had approvals for dwellings by govt authorities, and there have been tragic & financial consequences. Also as Celia’s article pointed out the insurance co.’s have new flood maps… There was an enquiry & findings made of the practices & actions around the Black Satuday fires… I think there needs to be the same for the floods. It isn’t an even playing field, and could be managed better.

      Like

    diannegray said:
    November 18, 2012 at 6:51 am

    My house and car are fully insured, but I have had no reason to claim anything yet (now that I’ve said that I’ve probably jinxed myself!)

    Great post and great responses – well done! 😀

    Like

      EllaDee responded:
      November 18, 2012 at 9:03 am

      Thank you. That’s good to hear… car insurance is a whole other scenario… as some of the comments pointed out the insurance scene is full of inconsistences but if you know you’ve looked after your own interests, it does provide much comfort. Highest good no harm be done for you and yours 😉

      Like

    Kourtney Heintz said:
    November 21, 2012 at 3:58 pm

    Great post! I lived on Wall Street post 9-11. I had renter’s insurance. You never know what could happen. But I knew what did happen and that made me shell out the extra money to make sure I could replace everything in my apartment. Things are replaceable. And it gave me peace of mind to know I could recover them.

    Like

      EllaDee responded:
      November 22, 2012 at 6:03 am

      Thanks Kourtney 🙂 Post 9-11 Wall St would have kept ‘what could happen’ very close to mind… I also have always had renters insurance… I just have to think how hard I had to work to buy my stuff, even if in the early days some of it wasn’t so new… if you add it up just contents costs thousands of $$$$, and if the worst occurs you have funds to get on with your life 🙂

      Like

    Kourtney Heintz said:
    November 24, 2012 at 2:50 am

    The probability of something catastrophic happening is low, but the cost is beyond imagining. I used to work in risk management and it was always the thing that seemed so unlikely that wiped a firm out. Just clothes alone can run you into the tens of thousands of dollars if you tried to replace every item in your closet. It’s crazy how much we accumulate over our lives. It’s crazier that we won’t shell out a fraction of that cost to insure it.

    Like

    roughseasinthemed said:
    November 24, 2012 at 10:58 pm

    Totally irrelevant to this, well apart from damage and not being able to get more than third party insurance on a vehicle more than ten years old, did I ever send you this link?

    http://justlandrovers.wordpress.com/2011/01/11/what-a-pane-5-cracked-it/

    Music is the title for each caption. You’ll recognise your fave, he/they are the ones who star twice 😉

    Like

      EllaDee responded:
      November 25, 2012 at 4:30 pm

      Thanks – I remember this post and the music captions. Windscreens are one of those things you hope is never damaged as the excess is about the same as the cost, so it’s not worth the paperwork.

      Like

        roughseasinthemed said:
        November 25, 2012 at 6:03 pm

        I couldn’t remember if I had or not, (I probably did on your AC/DC post) but I was sending the link to Vic and had to change a couple of links because the music had been withdrawn – yawn – and I was jigging around to AC/DC so obv thought of you. The windscreen cost more than all the other glass put together. Next time we buy from the scrappy, we’ll buy the frame as well, not just the glass.

        Like

          EllaDee responded:
          November 25, 2012 at 6:09 pm

          It was good that you did, and also commented back as I have been meaning to mention http://www.spotify.com/au/ to you. It’s not new (only to me) but has beome popular via Facebook and was recommended by a friend… I’ve been enjoying listening, to new, old and some new-old music I’ve never hear before.

          Like

          roughseasinthemed said:
          November 25, 2012 at 6:16 pm

          Oh thanks for that. It’s got to be good as they have a pic of a Mac Desk Top on the homepage 😀

          Like

    denisediscovers said:
    November 25, 2012 at 7:28 pm

    My city lies on top of a few faultlines, so I’ve never contemplated doing without insurance, and full replacement cover at that. If there is one thing I could imagine worse than being made homeless by an earthquake, it is not being able to replace that home. Still, it has been difficult since the Christchurch earthquakes. Our premiums have risen about 30% each year in the last 2 years. We’ve shopped around, but haven’t been able to get better deals, as a lot of insurers want to limit their overall exposure in particular places.

    One good thing is that the complex I live in is reasonably modern, so we’re not up for earthquake strengthening. The council has served legal notices for some buildings to have earthquake strengthening done, and the owners are faced with bills of $60,000 each to get this done. For some people this is really difficult, as they’re facing increased insurance costs too, and quite possibly on a fixed income.

    Like

      EllaDee responded:
      November 26, 2012 at 6:34 am

      Thank you, your’s is a really valid point. And yes, NZ has a whole different set of natural disaster issues… I was able to get a tiny discount since I upped our excess but that’s not an option when there is a viable risk… It’s not fair that when govt bodies approve building location & construction (ok, to a certain extent without the benefit fore/hindsight available now) that the other parties should fit the bill… maybe if govt bodies assisted with funds for the necessary work then they wouldn’t need to pay out disaster assistance afterwards… I hope you never need to make a claim 🙂

      Like

    maggiemyklebust said:
    November 25, 2012 at 9:17 pm

    I think as long as you have a mortgage on your house its mandatory to have insurance on it… right? And if you own your house outright (no loan) then chances are you can afford insurance on it…. right? You would think people would want to protect their homes…

    My family was recently hit hard by Sandy. My parents own two houses, one they live in, the other my brother lives in. Their house had no damage but the house my brother lives in flooded (bad). They have insurance on both houses, but no flood insurance (both houses are far enough from water, that it was not required). They just found out they are not entitled to relief funds either because its a second ‘home’… so they will have to pay out of their own pocket to fix it (and its a lot) they’re old and live on social security and my brother has nothing (thats why he lives off them…long story) 😦
    Sorry for going on and on…

    Like

      EllaDee responded:
      November 26, 2012 at 12:21 pm

      Thank you for your comment, and please don’t be sorry. I am interested to hear the varied comments and experiences re property insurance… in this case I am saddened to hear about your family’s experiences – they did all the right things…

      In Australia, since the recent disaster floods in Queensland flood cover is now mandatorily included in all policies and priced depending on risk… but of course it’s not ‘watertight’… there are all sorts of exceptions.

      I also thought you had to have house insurance if you have a mortgage but we’ve never been asked by the bank for evidence of ours.

      I can only wish your family all the best.

      Like

        maggiemyklebust said:
        November 27, 2012 at 5:41 pm

        Thank you and FYI… the first thing my mother did after the storm was to get flood Ins. Lets hope there isn’t a next time, but if there is she should be covered.

        Like

Comments welcome

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

w

Connecting to %s