There are many kinds of insurance out there. Most of them deliver some kind of actual useful benefit. But when you add them all together, they’re not cheap! In 2019, we spent over $50 a week on insurance. That’s better than any year prior since we started tracking, but it’s not a small chunk of change.
The general advice about insurance is to firstly insure your people, then your income, and lastly your stuff. Consequently, we have the following kinds of insurance:
- Life insurance for Mr R2A
- Mortgage and income protection insurance for Mr R2A
- Trauma insurance for Mr R2A
- House insurance
- Car insurance
- Contents insurance
All for the princely sum of around $110 each fortnight last year. Now we’ve been able to make some savings by tinkering around the edges. As our mortgage goes down and my KiwiSaver goes up, we’re gradually reducing my life cover. As KiwiSaver balances grow, I expect they’ll become a replacement for life insurance for a lot of people. They’re not a complete replacement as from what I’ve heard it does take a while to get the money so it’s still important to have some savings put aside to pay for a funeral.
We also made a big saving when Mrs. R2A stopped working and thus we stopped insuring her life and income. Should anything happen to her, we are blessed to have a lot of family living nearby to help with the kids. There’s no way I’d be wanting to put our kids into full time childcare, which is the primary expense that life insurance normally needs to cover, along with the mortgage.
In our bid to ensure we spend the minimum possible amount on insurance while making sure we don’t skimp on anything we’d actually miss should the worst happen, the latest victim of our crusade against insurance is contents insurance.
We don’t have a lot of stuff. We certainly don’t have a lot of stuff that’s worth much. My new guitar is probably the most valuable thing in the house at over $1000. Our TV would be the next most valuable thing at $700, but as it’s firmly attached to the wall it’s kinda hard to steal. After that would be the laptop we bought second hand for $350. Mrs. R2A’s engagement ring was a purchase that required a lot of thought and money for what I was earning at the time, but I wasn’t earning a lot and it certainly didn’t cost me three months’ income!
We’re paying around $500 a year in contents insurance. If someone waltzed into our house while we were out and took everything of value they could get their hands on, yes we’d be out of pocked by a few grand. Say, the equivalent of five or six years’ worth of contents insurance. So as long as our house only gets ransacked every five years, we’re in the clear 🙂 Those are favourable odds as obviously most people’s houses don’t ever get ransacked and only a very unlucky few are hit multiple times.
The other possibility of course is a total wipeout of our possessions due to fire or an earthquake. Flooding’s not a possibility where we live. In that case we would take the money our house is insured for, order a prefab house that’s better and more modern than the house we currently live in, have it placed on our site and still have money left over to furnish it.
I’m not saying this is foolproof. It’s entirely possible that some terrible event or a combination of events could leave us out of pocket. At the end of the day insurance is about playing the odds. The fact is that most people will pay more for insurance than they will ever get back in claims. But for some kinds of insurance that’s worth doing for the peace of mind. Life insurance and house insurance are definitely in that category. We used our house insurance when our chimney was damaged and the payout had enough left over for a heat pump and double glazing! So we know the value of insurance.
It just so happens that in this case, because we’re not hoarders of valuable things, the odds are in our favour for ditching contents insurance. I wouldn’t recommend anyone else do it without seriously looking at their own situation. If you’re of the minimalist persuasion, or lean a little bit that way like we do, it’s probably worth considering.
What are your thoughts on insurance? I’m keen to hear what kinds of insurance you value and do you think it’s worth what you pay for it?
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