The value of you

Why are our houses and cars insured more than ourselves?

We New Zealanders have an interesting insurance mindset in what we often choose to insure and what we do not. Part of what I do is understanding people’s expenditures,  so some of what I review is insurances. I do not believe there is one single occurrence where I have come across someone with a mortgage who does not insurance their home, vehicles and contents. Yet there are many people who do not have any form of life or income protection. Let’s look at the likely values of these assets:

What we chose to insure:

1. Home: The average Christchurch home value is around $430,000
2. Contents: Average contents insured value is around $80,000
3. Vehicles – I’ll assume the average vehicle is probably worth around $20000

What may or may not be insured:

1. Life; It’s obviously a lot harder to put a definitive value on a person’s life but the average life insurance policy appears to be around $259000. I assume this will probably be based on what they owe on their mortgage. (The majority of New Zealanders are considered to be under insured when it comes to life insurance.)
2. Income; the median income is $55000, for someone who is 35 that means their earning potential over the next 30 years is 1,650,000.

So from the numbers you can see we prefer to insure our lesser assets over ourselves. I’m sure most people could survive not having a car for 6 months, via bicycles, buses, feet and taxis. Yet how many people could survive 6 months with no income. Only 20% of NZers have income protection while 92% of cars are estimated to be insured.

I’m not saying do not insure your car but does it make sense to insure your $20000 car but not the person, capable of earning $1.65 million, driving it?

The information contained in this article is of a general nature and should not be taken as advice. It reflects the opinions of the writer only and does not necessarily reflect the opinions of New Zealand Home Loans.