Getting home insurance is something I am sure everyone is told they need and must have but I am going to suggest some reasons why I wont personally wont be renewing my home insurance this year. I find myself after eight years of having my own house and paying every year a premium for this protection wondering why I bother and do I really need it? For me this is the year I’m going to change things. You might be wondering why I decided to go this route especially as I have written many times about the benefits of getting your own insurance for business, vehicles and other assets. It’s not about any problems I have had with my insurance company its simply that I have come to the realization it is an expense I can probably live without.
Since I started my financial journey, I become more conscientious with my finances. I manage my bills by making sure I get value for money and maybe even more than a good deal every time. If not, then I look at that specific expense, weigh the pros and cons and decide whether I can live without it or not. For this year that expense is my home insurance and here is why.
Home insurance doesn’t come cheap nowadays and every year that premium doesn’t get any smaller. Recent research shows that many families right now in Australia are facing an affordability crisis with the home insurance premiums doubling up in just 5 years. It was also revealed that the average cost of home building protection has increased by 110% while content premiums are up by 34% since the start of 2009. This would be twice as much as the comparable increase in wages over the same time. I know I personally experience increased premiums EVERY year which when I think of it I spend time and effort to keep down by shopping around with as many companies as I can find time to call. Face it premiums will probably go up every year and if and when you want to cut down on the costs we may all end up having to sacrifice a portion of the coverage.
Alternatives for your money
Home insurance can cost around $700-$1400 a year depending on your home, your contents and where you live. Imagine what that kind of money can do if you set it aside as a savings or for an investment. You can even use part of it to pay off debt that incurs higher interests each year. Work out how much you save on $1000 worth of credit card interest a year! Alternatively go down the compound interest path and slowly build on this and in a couple of years you can see a really impressive change on your financial security.
The biggest reason – No claims
When I finally had a property of my own to call home I insured it thinking that whatever I’m paying is well worth whatever damages I’ll have in the future and worth it for peace of mind. Well that was 8 years ago and until now I haven’t filed for a single claim for ANYTHING. Studies of insurance company underwriters show that typical homeowners have one claim every ten years.
Another thing you must remember about claims is that when you file one for a problem thinking you’re getting the most out of your insurance, well you are in for a surprise. Homeowners who file frequent insurance claims, can get bad credit, have their premiums increased as a result and some even have their home insurance coverage canceled due to frequent claims activities. See what I am saying here? When you use your insurance for what it is designed for you they may want to cancel your policy on you!
So whats your risk versus reward
Just because I don’t want to continue paying for home insurance it doesn’t mean I don’t care about my property. What it will mean is I will have extra money in my pocket every year for something else. Since I will no longer be insured I do plan to take extra care and precaution with regards to my home with some of the following;
- Keeping the house well-maintained means less worries about structural damages.
- Extra locks and being more careful and vigilant should in theory cut down on chances of burglars.
- Surge protectors and unplugging some electrical items I hope will mean no damage to my stuff.
Anything that does break well as long as I spend less than the cost of the premiums I am still ahead right?
Regardless of the state of the global economy at present you always should wisely spend your money and identify your priorities especially when you are looking at managing your bills. Remember that just because you have been told you need something like insurance doesn’t mean you can afford it in the long run or should just blindly follow the the advice without thought.
Whats your risk versus reward for canceling your insurance? Have you made the decision to not have home and contents insurance? Leave us a comment and dont forget sharing is caring.
***Photos thanks to netalloy of openclipart and K Teegardin of Flickr***