Agony Aunt: I'm 91 and uninsured. Help?
Dear Janine,
I am a 91 year old WW2 veteran and could go into a rest home, but I want to stay in my house until I join my dear wife in the local cemetery.
I would be very grateful for your thoughts on my insurance problem.
My home is situated in a small town and has a rateable value of $180,000. It is freehold, and has always been insured, but recently I took out a small mortgage and the insurance costs went up to almost $1300 annually, which is a formidable sum to a pensioner.
I repaid the loan some months back and was declared free to negotiate my own insurance.
I rang several companies, but the premiums were so high I have reluctantly left the house uninsured, but take great care to turn off all electric and gas points before leaving the house.
I would like to know where to get the most affordable and reliable house insurance.
ANSWER:
When faced with a curly problem, it can be useful to run a straw-poll. Let's find the oldest person in close proximity and ask what they would do if faced with a large insurance bill in their nineties.
The answer requires translation, because it's unprintable. My test-case said they would tell the insurance company to place their premiums in a position where there isn't a lot of sunshine.
After 91 years on this planet, I'm sure you won't struggle to decipher my father's opinion on this matter. I'm a little concerned by it and gave up on the poll.
Your age is quite emotive. Nobody likes to hear that a man who has seen 21 Prime Ministers in office and fought for his country, has been charged $1300 to insure a modest house.
You were born at the same time as Norman Kirk and we can be pretty sure he'd have a thing or two to say about this injustice, if he was alive today.
Your polite acceptance of this "formidable sum" is a credit to your resilience. An uninsured house is worrying you. Having to consciously think about gas and electrical points, introduces a level of stress you could do without. If disaster strikes, you need money to move elsewhere.
Digging up details for a quote
In your letter you gave me your address. Using Quotable Value, I can see the materials your home is constructed from and its size in square metres.
The website 'need2know.org.nz' estimates a rebuild price at $254,000 with no garaging or extras (bear in mind there were a few assumptions made).
Next stop, AA Insurance and State Insurance as they provide online quotes. The annual premium from AA was $821 and from State $797.
I also spent half an hour on the phone with Youi Insurance and nearly had a cardiac arrest when the price came in at $2009 a year.
If you have other policies with AA or State it seems to make about $50 difference to the annual price.
One factor in your favour is your 'maturity'. Insurance is not like cheese – the price decreases with age. Your bill is around $80 to $120 cheaper than someone half your age.
Tweaking the gear leavers
There are only so many levers you can push and pull to alter the price of insurance. You can fiddle with the sum insured and the size of the excess (the amount you pay towards each claim). You can also fiddle with the quality of cover.
There are policies known as 'defined events'. These give protection from major worries like fire, flood, natural disaster and burglary with forced entry.
They remove the ability to claim for accidental damage and this makes them cheaper. Careful reading is vital.
Something is better than nothing
Given their experience with tweaking gear levers, AA Insurance have run the numbers to show how the price of home insurance can be reduced.
Customer relations manager Amelia Macandrew explained that AA is very happy to work with customers on a budget. She emphasised that something is always better than nothing when it comes to insurance.
In your case, it's likely you are most concerned about a major claim, where your home is unliveable and might need rebuilding.
At 91, you can't wait for green bananas, let alone a major building project. A low stress solution is to have enough insurance in place to take a cash-payout and move into a rest-home, rental, or buy a small unit.
As you can see from the table, we can get the price down from $821 a year to $591 by halving your level of cover to a house value of $125,000, increasing your excess to $1000 and using a "defined events" policy.
But look carefully at the figures. There is no point in under-insuring your home. A policy for a $250,000 house only costs $25 more a year. Increasing the excess and accepting a policy with more limited cover, has the most impact.
Have a more detailed discussion with an insurer such as AA or State and please make your family aware of this issue.
Janine Starks is a financial commentator with expertise in banking, personal finance and funds management. Opinions in this column represent her personal views. They are general in nature and are not a recommendation, opinion or guidance to any individuals in relation to acquiring or disposing of a financial product. Readers should not rely on these opinions and should always seek specific independent financial advice appropriate to their own individual circumstances.