When doing a budget it pays to know what matters most to you and your family
Like many Australians I hold Home & Contents insurance to protect against a major financial loss (namely my home asset). This makes my bank happy too. Recently I did some research and budgeting analysis on general insurance premiums and why they had risen so much over the past few years. I took the time to call my general insurer to ask about the levels of cover mainly on the home portion of the poli
I was astounded to learn the following:
- The insurer in the event of total home destruction had the option to tell us who we used to build with again depending on whether the home was originally built by a mass provider or private builder (this effects the price of the new construction greatly if you know anything about the building industry.
- The policy indexed each year by quite significant amounts far greater than the cost increases of some building companies and building supply products.
- The insurer would only provide an insurance payout to an amount that would replace our original home using today’s market costs despite us having held considerably higher levels of cover thanks to indexation on the policy.
- Reducing the cover back to today’s actual replacement value saved us approximately $40 per month alone.
- Increasing the Excess from $250 to $1,000 reduces the cost of most home and contents policies by 50% to 70% all other things being equal. That’s amazing! After all who would claim for the cost of a broken window knowing that the repair is under your excess anyway?
- If you can afford to pay annually, do it, even if it means putting it on a credit card and paying the premium off over 3 months. You can save 15% or more in some cases.
The Real Important results for Australian families
The above analysis combined with smart budgeting techniques saved us $122 per month!!! No, that is not the important thing, but it’s a start. According the insurer and my calculations and research on building costs we are still 100% covered for loss of our home.
This level of saving allows the average male or female aged 35-40 to hold $250,000 to $300,000 of life and trauma cover. Alternatively it would quite easily fund most of (if not all) a comprehensive income protection plan for most people of that age.
Australians are obsessed with spending money on things to impress people they don’t know or like. Almost everyone spends huge premiums each year on cars 4 years older or more that are worth a fraction of their replacement cost. What many don’t realise is why they are happy to pay good money to protect a material asset for fear of losing it what they don’t realise is without adequate personal insurance in place they risk loosing far more or the lot.
By thinking outside the square it is possible to improve your position beyond what you first may have thought possible. Money is a finite thing but its how you spend what you have that’s important.
We realise times are tough for many Australian families, small business owners and workers. Spending time on your own budget and family protection costs you nothing but your time.
If you are having trouble working out how to protect yourselves without forgoing other necessary needs or wants feel free to give our office a call or pass our details on to somebody you know who is risking it all.