It's a vexed issue. On one hand, it's hard not to feel sorry for anyone who is facing the loss of their home, or a substantial repair bill. On the other hand, no home-owner should be uninsured.
Gravedodger visits here regularly. He made this comment yesterday at Homepaddock (our emphasis added):
In middle age, with cash flow issues, facing the annual insurance roll-over I would muse on self insurance and concluded if I had started early and obtained insurance quotes, placed the equivalent premium in a managed fund would I have been ahead or behind.
It was always too late, the lower risk of total loss had passed by.
When we had a total loss house fire in 1990 I never revisited the subject again as having the luxury of the support and the expertise of NZI to manage our little disaster was worth a lot more than the premiums we had paid over the years.
Some larger organisations self insure and with the statistics and the law of averages on side it works but for joe and josephine average a good dollop of luck would be needed to get away with it.
When our spawn entered the property market we breathed a sigh of relief as the lender ensures the asset is insured and the mortgage required the responsibility to be met and compulsory saving was achieved.
It is so easy when the baubles overcome discipline but anyone who “saves” money on minimising or ignoring insurance they are fools with honours.
Gravedodger's story should be a salutory lesson to anyone without household insurance. A tragedy can strike at any moment.
Others see it differently. Over at The Standard, Anthony Robins blogs:
The government needs to do better on the issue of the uninsured. The cost of the buy out offer is currently estimated to be between $485 million and $635 million. Compare that with $1.6 Billion for the SCF bailout. I don’t see that an uninsured resident of Avonside is any less deserving of government help than an investor in a dodgy finance company.
In comments on various forums about the place I see some fairly strong anti-Christchurch sentiment emerging. “Stop complaining and take the deal”. “It’s your fault you’re not insured”. That sort of thing. As always the nasty underside of New Zealand society is never very far from the surface. As if the residents of the shattered suburbs didn’t have enough to cope with already…
We disagree wholheartedly with AR's comments about a "nasty underside", and have commented as follows:
AR; there’s nothing nasty about those who have taken the sensible precaution of insuring their homes being unhappy if uninsured people get bailed out. What is the point of paying insurance premiums if the government is going to come along and clean up afterwards? To not insure your most significant non-human asset is negligent; probably grossly so.
We reckon that if you own a house, it's foolishness in the extreme not to insure it, and its contents. Even for those on a limited income, insurance should be budgeted for in the same way as mortgage payments; a high priority spend, not an add-on from what remains. Most banks require proof of insurance before a mortgage is drawn down, but all too often, home-owners let the insurance slip, with often catastrophic effect. Perhaps three needs to be a better interface between the banking and insurance industries to ensure that insurance is maintained on properties partly owned by the bank.
That's not to say that we don't feel some pity for those who have suffered a total, uninsured loss. But ought the government bail those people out to the extent of the loss, or should the individual have to wear some of the loss? This will doubtless become an issue as time passes.
We are certain that the John Key-led government is not without compassion, but on the other hand, the pantry is bare, and with estimates now that the total cost of the earthquakes is going to exceed $25 billion, there will be many demand on the government. We reckon that this is an area where the government will be targetted by those who excel in spending Other People's Money.
What do YOU think?