Imagine coming home from a long night shift at work and look forward to a decent fry up to feed your hunger, or you come home from a great night out with the lads to a cold house and turn the old bar heater on in the lounge (which just so happens to be too close to the curtains) and in both the scenarios above, because of your inattention, a raging fire results.
This very scenario above played out for a former Dunedin student Glenn Shields (he left a pan on the stove which subsequently caught fire) that resulted in a life of misery and massive financial burden amounting to $150,000.
In Glenn’s case, because he never had any form of insurance on the property he was renting, the only recourse for the owners insurer was to target Glenn AND his fellow flatmates to recover their financial loss.
That was over several years ago, but regrettably the potential risk for so many tenants is still very real and unchecked.
What many tenants don’t realise is that if their names are on the tenancy agreement, then they are ALL jointly and severally liable irrespective of whether they were at the property at the time or not. Furthermore if there is damage caused to the property by visitors that are invited to the property, once again resulting in damage then the tenants are liable.
But why does this risk exposure not seem to be an issue for the younger renters in the country?
In a recent Massey University study 70 per cent of respondents saw value in having insurance.
Despite this, only 20 per cent of the 18- to 22-year-olds surveyed, and 29 per cent of the students, had any type of contents insurance. Dr Claire Matthews, Massey University’s Director of Financial Planning, says cost, lack of information, or misunderstandings about coverage under their parents’ insurance are the main reasons why young people don’t have insurance policies of their own.
On the flip side to Glenn’s story, recently, a group of Auckland students accidentally flooded eight floors of their apartment building when a coathanger was left on a fire sprinkler, causing $26,000 worth of damage. They were spared the crippling cost because one of the students had insurance for up to $1 million of legal liability.
Most people don’t know that this is a common bonus feature of most forms of contents insurance, also sometimes advertised as renter’s insurance. This student’s insurance policy saved the day for this very lucky group.
Why are so many leaving themselves open to the loss of not only their own possessions, but also potentially getting the blame for someone else’s mistake?
Cost seems to be a consideration – particularly for students, but worryingly mature adults with families on low incomes also seem to fall prey to this line of thought.
The key message here must to be to ensure that we give contents insurance the big thumbs up when budgeting and planning the family’s finances.
Directing the cost of the equivalent of one DVD hire a week to contents insurance could be all that is needed to safe guard and protect your family from the ravages of ill considered decisions.
Most people think that Contents Insurance only covers ‘Contents’ yet most policies usually carry up to $1 Million of legal liability, which in most cases is enough to insure them for most situations.
Points to remember . . .
- As a bare minimum – get contents insurance
- If you are rejected by one insurer- try again or even try your bank
- Budget for the cost of insurance
- It is better to manage what you can control like Insurance costs, rather than having no control when insurers chase you for their loss