FOR many people, insuring against what “might” happen is not as important as budgeting for what “will” happen — like food and power.
Having insurance to cover household contents has become an extra that most people on low incomes cannot afford, says the Gisborne Budget Advisory Service.
The house fire on Wednesday night in which a family with no contents insurance lost everything they owned is the latest in a list of similar situations that highlight the high price families pay for not having insurance.
This year there have been 11 serious house fires in the Gisborne region.
In more than half the cases, families had no contents insurance.
Assistance from social welfare agencies and the Gisborne community help people back on their feet.
Gisborne Budget Advisory Service manager Lynda Markie said by the time people required their help, insurance was not often on the list.
“When people are on a very low income, the budget just won’t go the distance to include insurance.
“Contents insurance and third party car insurance are things we do encourage. But if the client does need to make cutbacks then it is definitely up to them where they make those cutbacks.”
Some insurance companies will insure on a minimum of $8000 for contents.
Emerre and Hathaway Insurances quote an amount of $300 a year for a restricted cover for fire and earthquake on contents valued at $20,000.
Director Ray Brott said this would also include a tenant’s liability for accidental damage when tenants are liable — for example a kitchen stove fire — so the the insurers of the house owner might be legally able to recover the costs of damage from the tenant.
Broken down into instalments, this cover equals $28 a month or $7 a week.
NZ Federation of Family Budgeting Services Inc CEO Raewyn Fox said the basics of housing, food and power were always top of the list when prioritising expenses that outweighed income.
“For those on very low incomes, including beneficiaries, there is often nothing left after these three essential expenses. Medical costs and schooling are also very important — it is hard for those on low incomes to prioritise insurances, which they might not ever need, over day-to-day living costs such as school lunches, cellphone top-up and transport.
“Unfortunately, there are many in our community who make these hard decisions each pay-day . . . which expenses are they going to meet and which ones they will go without.”
Insurance Council of New Zealand spokesman Chris Ryan said insurance had gone up as a result of the Christchurch earthquake.
In some cases it had doubled.
But the price people paid for insuring their contents was worth it, considering the high price they paid after a disaster.
“It depends what people see as being important for them.”
Mr Ryan said people with mortgages had to have insurance as a prerequisite for the mortgage. But for those who rented a home, it could become an item left off the budget.
Taking out insurance was “very important”.
“The cost of having to replace everything in your home is terrible. If you can possibly insure, do so.
“The consequences are very hard on families and you can see the amount it takes for people to replace things in their home when they lose them.”
“If people are insuring for just contents, they might be quite surprised how cost-effective it is. While we do understand the cost might feel like a lot, the downside of not having insurance is usually after the event and the price people pay then is very high.”
Potential consequences for tenants who are not insured can add to what has already been a devastating event in their lives.
If tenants are found to have been negligent, or if the fire was wilfully started, then the insurance company or the landlord could pursue them for damages, said Mr Ryan.
“When you take out contents cover you are covered for that liability and automatically protected from that sort of thing happening.
“I don’t think it’s very common that those things happen but there is the potential there. I think it is really important that for a relatively small amount of money, taking out contents cover can protect them.”