Premium for burglary hits everyone
Covering your prized possessions against theft is setting householders back $12-$15 of every $100 they pay in premiums.
Officially, burglary rates are down (59,518 recorded by police in 2011 compared to nearly 81,000 in 1997), but it's still costing households a pretty penny in premiums.
IAG estimates the percentage of an individual's contents premium covering the risk of burglary would be in the range of 12-15 per cent, depending on where you live.
The cost can rise significantly if a burglary ends up costing you your no claims bonus, which can be worth a 40 per cent discount to full price.
A spokesman for IAG, which owns the NZI, AMI and State brands, said the 12-15 per cent cost is higher than allowances for accidental damage (between 10-12 per cent) and loss (4-6 per cent).
"Other factors that contribute to the cost of contents cover include fire, claims expenses [the cost of administering claims], reinsurance and reinstatement charges, natural peril," he said.
In a person's total insurance policy they will also face a levy for the fire service and Earthquake Commission plus GST.
On one quote from State resulting in an annual premium of $803.51 for a comprehensive contents insurance policy, the earthquake levy was responsible for $30 of premium while the fire service levy added another $15.20. GST added $104.81.
The cost of burglary does not end at the premiums however, because many contents policies are for "present value", which is a fancy way of saying the second-hand price, and sometimes the rates at which items lose their value can be alarming.
Also, people who want to be paid in cash can find the insurer seeks to pay them less, arguing they are able to replace items at cheaper rates than they could be bought in the shops due to their stronger buying power.
People need to be careful to "specify" particularly valuable items, such as expensive cameras and jewellery, on their policies or insurers can be within their rights not to pay in full.
Even "target hardening" your house with alarms, window locks and a big dog produces only small reductions in premiums - usually around 5 per cent. Alarms, as that discount shows, do not extinguish the risk of being burgled.
"In terms of discounts for alarms etc, yes we offer such discounts. However, as a catch-22, we find homes with alarms are often burgled because the nature of the contents can be perceived as more valuable/desirable," the IAG spokesman said.
"No matter how you offset the risk of burglary, you would still face a premium for contents cover that is not massively reduced. That is because of the weight of the other risks."
COMPETING COVER CLAIMS
Just how much home contents cover you should have is a vexed question. Insurers all have online calculators to guide people through the process of coming up with figures that accurately reflect the value of their possessions, but it is a tough task.
So insurers tend to provide guides for people to give them an indication of what an average household's contents are worth.
The trouble is, they all give different advice. State Insurance's online contents insurance calculator suggests an average house's contents to be worth $68,486. ASB ups the ante for an average home to $74,382.
AA Insurance suggests $76,460, while Tower has it at $81,355, though it also says: "As a guide, your minimum contents sum insured should equate to 40 per cent of the replacement value of your home, eg, replacement value of home is $100,000 therefore contents value should be a minimum of $40,000."
Kiwibank believes the average to be $84,355. Westpac has the average at $85,595. If you are "above average", the advice is no less confusing with the range of "above average" estimates going from $124,708 at ASB to $213,930 at Kiwibank.
Sunday Star Times