Taking out an insurance policy probably doesn’t feature high up on many people’s lists of fun things to do.
In fact, it possibly tops the list of methods for self-flagellation.
When buying even a basic mobile phone or household item, customers are often asked whether they want individual insurance for it.
Then there are the significantly more important policies most people would agree it is wise to consider: travel insurance, health insurance, home and contents insurance,
vehicle insurance, mortgage insurance, accident and injury insurance, life insurance, business insurance.
To understand what each policy entails often involves reading screeds of information, sometimes in impenetrable language.
Most people would understand it is wise to "shop around" for alternative price and coverage options — which is likely to necessitate reading even more information, in similarly-impenetrable language.
The options must be weighed up and other factors considered. Is the policy desirable?
Necessary?
Is the same protection already offered under general consumer law?
Is the same protection already offered within a current policy held?
Does the insurance cover everyone it needs to in the household or business?
Is the policy affordable?
It is a minefield for the average person.
Little wonder many people put off thinking about and acting on the issue.
Little wonder if people have taken out a policy, they are probably unlikely to review it.
Little wonder a Treasury report (partially released in May but only now available in full) has found up to 85% of New Zealand homes could be underinsured — by an average of 28%.
That is a huge concern, given that most people’s homes will be their greatest asset.
The way in which homes are insured has changed significantly since the Christchurch earthquakes, and it appears homeowners simply haven’t got up to speed with those changes.
Home insurance policies used to be for "unlimited full replacement".
Policies now require the actual "maximum sum insured" to be stated and that is the figure up to which insurers will pay out.
The "default" sum — if holders have not updated their policy — simply might not be enough to cover the cost of rebuilding a house in its existing form should the worst scenario eventuate.
There is undoubtedly work involved on the part of homeowners to establish what it would cost to rebuild their home.
And while it is unlikely a home will be destroyed to the extent the only option is a total rebuild, recent history has taught us it is not impossible.
Christchurch property owners faced lengthy and upsetting post-quake insurance battles.
South Dunedin residents have also had a brutal wake-up call.
A complacent "it won’t happen to me" attitude could be potentially devastating.
As property prices rise in most areas of the country — and spiral in some places such as Auckland and Queenstown — owners could lose out big time if their insurance policies don’t match up.
The onus is firmly on policy holders to take the requisite action.
The Treasury report did not recommend any Government action on the issue, and it also found insurers were reluctant to encourage homeowners to get extra cover they might need — for reasons including that it might drive policy owners to shop around to find cheaper cover.
Procrastination is not an option.
Homeowners should do some homework themselves or invest money in some expert advice.
For one size will not fit all. Insuring is a complex business and a raft of factors will be taken into consideration.
It does not generally cost an enormous amount extra to get significantly greater insurance cover.
The biggest investment required is likely to be time.
But who knows when the next Christchurch earthquake, South Dunedin flood, house fire or other catastrophic event might occur.
It’s really not worth banking on hope alone.
