Why Don’t We Have Insurance?

Why Don’t We Have Insurance?

Home and contents insurance seems like an essential backup, but one in ten Australians avoid it. Why are we insurance-shy? A new survey suggests some possible answers.

Picture by Troy Kelly

The survey, conducted by insurance operator IAG, asked 1200 Australians why they didn’t have home or contents insurance. The most common concern was that insurance was “too expensive”, a reason cited by 40 per cent overall. Here are the other factors involved, broken down for both home and contents insurance:

Why Don’t We Have Insurance?

The figures are fairly similar in both categories, with two notable exceptions. When it comes to contents insurance, there’s a stronger apparent disbelief that the claim will be paid in the first place. In terms of building insurance, preferring to pay for damage yourself was twice as common an argument for buildings than for contents. In essence, I suspect that’s a variant on “it’s too expensive”: in high-risk areas, the insurance premiums might be so high that self-insuring seems preferable.

The list of reasons isn’t exhaustive: for instance, if you live in a unit, you won’t pay for building insurance directly (though it will be part of your fees). Have you resisted getting insurance? Tell us why in the comments.

Lifehacker’s weekly Loaded column looks at better ways to manage (and stop worrying about) your money.


  • i pay insurance

    i have 0 sympathy for those who lose their house to fire, flood. loss of contents to theft, fire, flood etc

    dont go putting ur tough luck story on today tonight/aca looking for a pay out from sympathetic old grandmas life savings

    nothing grinds my gears more than those looking for a government or sympathetic handout. same thing when the floods hit brisbane etc, those that didnt have insurance, suck it up – its your fault. i pay my premiums and can barely afford it, but i pay it because it gives me peace of mind that everything i spend my life accumulating isnt gone in a blink of an eye when that lightning bolt 1 in a million chance hits my house

    • “i have 0 sympathy for those who lose their house to fire, flood. loss of contents to theft, fire, flood etc”

      I hope you just forgot to add “and don’t have insurance” on the end of that sentence.

      • Yes, this is a very important distinction. There are a *LOT* of people in Brisbane who thought they were covered for flood damage, but their insurance companies wriggled out of it on technicalities.

        • Same happened where I grew up. There was a ‘once-in-100-years’ flood which took out most of the town. Almost no insurance companies paid out on flood insurance for one reason:

          They classed a flood as caused by rainfall. In this case, The river had burst its banks largely because of extreme rainfall further upstream. Ergo the town underwater wasn’t a flood.

          I know people there who haven’t bought home and contents insurance since.

    • Well aren’t you high and mighty then? What about some well disciplined people who don’t insure, but instead keep a rainy-day savings and are able to financially cope with losing their house to a fire or some such? In that scenario, whether the person is insured or not, they will have lost irreplaceable items like heirlooms, memorabilia and photos. Are you saying that the man who pisses his money away at the casino (but was smart enough to get insurance) deserves your compassion, but the man who is disciplined enough to be able to handle the financial repercussions without insurance only has himself to blame?

      I guess all I’m saying is sure – if it’s your pet peeve then don’t have any sympathy for their financial situation – but try not to let that infect your sense of sympathy for the things that insurance can’t cover anyway (like, I don’t know, loved ones who died in the incident?)

      • You said it yourself – you are self insured. So you do have insurance, just not with an insurance provider.

        I got no problem with that, unless at the end of the day, when something does happen and you “may” find out it was inadequate, then you cop it on the chin and don’t go crying on ACA.

  • Major Dental insurance. Every insurer will say if you don’t have this you will be paying through
    the teeth! I avoided it for a long time because paying this and your dental bills will amount to
    near enough the same what you might pay a dentist.
    Well, I got it after a while and I was right. The only thing you get major insurance on is
    the checkups and minor fix ups like cavities and stuff. Forget it if you need emergency rootcanal.
    The dentist will overcharge you over a $1000 and you only get back like $39 or something.
    It’s a giant ripoff.

    Also, take care of your teeth!

      • Actually, just do the maths. I added up the yearly premium on most providers top dental cover and then what you got back and worked out you had to claim most of the schedule yearly to get ahead e.g. have your checkups/cleans/root canal etc. Otherwise it was just cheaper to pay cash. Remember they only pay up to a certain amount per year on each item.

    • If you get proper private health insurance you can save bucket loads on your dental…. I’ve saved well over $500 this year along on dental with my insurer.. plus $280 worth of optical. My mum made this comment a while back too and was surprised that I got a lot more than she ever did… It pays to read the PDS..

      • Mine was actually a mixup, I do have major dental, but they overcharged me anyway for
        some bizzare reason. I did switch insurers after that.

  • I don’t pay insurance.

    I rent and have been broken into a total of once in 20 years, while I was a student at uni. Also if you live in a share house, most insurance companies will not cover anything in a ‘public area’. ie: if you cannot lock your bedroom door. Nothing is covered.

  • House and contents insurance is the reverse lottery ticket, if you don’t have it and your number comes up, then you lose big.
    I agree with Simon (bloody legend) – you took a risk betting that nothing would happen to your house, it’s a bit like putting your whole house on the Gold Coast Giants to lose every week, one day you’ll be sorry.

    Health insurance is different, because the providers pay out 1000’s of claims every day, so the margins are much smaller, and stuff like root canals you never get back all the premiums you put in. When it comes to bigger issues, like heart surgery etc, well Medicare covers most of the emergency situations, so the benefit is pretty small there too. The problem is the government slugs you for having health insurance and slugs you if you don’t have it – not happy Jan.

    • Yes.. I am a bit annoyed about being slugged twice.. I am a good little citizen, pay my taxes.. get myself top cover health insurance etc.. but still pay the levy on top..

  • Insurance makes good sense when: a) In addition to the financial side of things (which is a net loss to you, over all insurance forms, over your lifetime), it buys you peace of mind that you otherwise wouldn’t have had – ie you can park the car somewhere less than ideal and not stress about it.
    b) you are a higher risk to the insurance company than the average person and they are unaware of this / don’t charge you higher premiums.
    c) you don’t have the executive control / mindset needed to self-insure
    d) you are insuring against rare events that would have dramatic consequences that you can’t easily self-insure.

    I guess building insurance falls under the latter category, but it may still not make sense if you believe you’re a much lower risk than average or believe you can deal with it if the rare event happens.

  • I am selective in my cover. I insure for loss of the house from fire. The bank requires that I insure in order to maintain my mortageg.
    I don’t get theft cover on the basis that it is highly unlikely that crooks will take away more than $5K worth and I can bear that. The real value is the loss of work information and photos etc from loss of computers. To mitigate the risk I take most of my electronic equipment with me when I leave the house overnight and backup all my critical data. It saves me several hundred in premiums a year.

  • A smart way to buy insurance is to take a large excess. In my case $1,000 and I receive a 40% discount. I used to work in the insurance industry and small claims are very frequent and expensive to administer which is why I receive such a big discount for $1,000 excess. What really gives me the urks is fire service levy, stamp duty and GST on top. Ie Government taxes and charges are more than 1/2 the cost.

  • Insurance companies exist because they take in more money than they pay out.

    All things being equal in a purely numbers game, you’re better off without insurance. Emotionally maybe not.

    As mentioned above though, this particular numbers game is like an inverse lottery ticket. It probably won’t be at the slim end of the odds you but if it is and you lose your house with no recompense then looking at the stats and saying you made the right choice based on the info to hand won’t make you any feel any better.

  • Yup.. I hate watching my money trickle out of my pocket into my insurer’s pocket… but at the end of the day, if there was an “incident”, I’d be well out of pocket without it. Same with car insurance.. people are more likely to get comprehensive on their cars even though it actually often costs more than a decent contents (not building) policy.. and it’s just the car itself… of course, if you never had an accident.. you’d be in the same boat as with non-incident contents cover..

  • I’ve seen a few houses over the last few days where the owners would be totally stuffed financially if they didn’t have insurance. There’s plenty of crappy weather to keep us SES volunteers busy right now.

  • If you look at it from a gambling perspective, it’s a gamble both ways. Option 1: Insure. The risk is that you may never have anything bad happen to you, so you’ve basically lost all that money. That’s a gamble. Option 2: Don’t insure. The risk is that something bad may happen to you and you’ll have to pay for it.

    If you look at the population as a whole, insurance works by taking $100 from 100 people, and giving $10,000 to the one person out of 100 who sadly lost their car in a flash flood. Well, not quite true, it’s more like taking $150 from 100 people, still only giving $10,000 to that unfortunate person, and the remaining $5,000 goes to paying staff, shareholders, maintaining the insurance company, etc. etc. In the end, you have to realise that the pot odds are in the favour of *not* getting insurance.

    • For the record, I don’t have insurance of any kind, and I most certainly do not expect any sympathy from others should my “gamble” not go in my favour one day. One day, I’ll need to have a certain surgery I won’t describe, and I intend on paying for it in cash and it will be an expensive one-off fee. I’ll still be better off than if I had been paying for private health insurance all these years, though.

      We non-insurance-types don’t want your sympathy, but we would appreciate your respect that we’ve actually thought long and hard about the choice and made a rational decision – it’s not about laziness or stupidity at all.

  • I’ve been self-insuring for health insurance since the whole private health insurance rebate rubbish was started. I object to private health insurance because those companies are in cahoots with the whole private health industry to suck money out of ordinary people for things that shouldn’t cost as much as they charge.

    By not being in charge of making your own sensible economic choices (ie by having a private health insurance company tell you where you can go and what you can have done and with whom) when it comes to health you give the private health industry the right to overcharge and underservice everywhere you go.

    Since they brought in the penalties for people who don’t use private health insurance I chose to put the equivalent amount of money as my annual fees would be into a dedicated bank account. 10 years later I have more than enough money to cover just about the most expensive medical treatment you can imagine, and the bank keeps topping it up with interest payments. I have regularly raided it for dental and other health expenses. As an insurer I rock. I’ve never refused to pay out, and I’ve never told myself that I have to use some outrageously expensive private hospital where the service and cleanliness is no different, and probably worse, than the public system.

    The additional premium I will pay one day to the government for not having private health insurance I will do gladly. The public health system is far more efficient, and the money I put into it makes the whole country a nicer, safer, happier place to live.

    • “10 years later I have more than enough money to cover just about the most expensive medical treatment you can imagine…” You’re living in fantasy land, mate. Let’s say for argument’s sake you’re single and paying top cover. Say it’s $200 a month. After 10 years, you have about $25000. A nice sum, but nowhere near the amount needed for ” just about the most expensive medical treatment you can imagine”.

      My father has had two heart attacks and had two stents inserted. The cost of one of these procedures would be in the region of $30000. He’s had two. He could live for quite a while before he has paid out the value of that.

      You might not be heart attack material, but it’s not the only expensive thing that can happen.

  • I can understand self-insuring for contents, or arguments that it’s too expensive , not good value etc. But for building that’s nuts.

    Insurance is a game, if you have the capability to replace the insured item or the item is a luxury not a necessity – you can beat the game by not insuring or self insuring. e.g. for contents insurance you can replace items with 2nd hand, or not replace luxury items if your “savings” from not paying insurance hasn’t left enough in the bank to cover everything. Plus consumer goods deflate, for most of your possessions you can buy cheaper versions now than you could before.

    But for a building. There is no way you can cover the cost of replacing a home out of the money “saved” from not having insurance in ones lifetime.

    • +1
      My ridiculously-inclusive home and contents insurance is well under a grand a year for >$500K cover, so if I only claim once every 500 years I’m ahead 🙂

      That’s just dollars – it’s impossible to put a value on the peace of mind; I evacuated due to fires last year and spent a few days away, waiting for Channel 7 to gloat over my burning house (didn’t happen) … but not terribly worried.

      Perth forecast is for hail and damaging winds tonight but my backups are sound and in the worst-case scenario it’d be no more than an inconvenience (and opportunity) to rebuild… but not terribly worried.

      The justifications in the article table defy belief, > 1 in 6 people says they’d pay for building damages themselves? Exactly how many years of premiums does it take to replace a house destroyed by fire in some unforeseen circumstance? sheesh

  • I took out contents insurance and got robbed for the first time a year later. $10k gone in 5 minutes. Really glad I insured.

    Health ‘extras’ insurance, on the other hand, is a scam.

  • Can you please post a link to the survey source? I’m interested in reading a bit more than just your summary table but there’s no reference at the bottom of your article.

  • Renters contents insurance is so ridiculously cheap I have no idea why people don’t get it. I haven’t had to claim against mine yet, but was very glad to have it when I found scratches on our doors one day from screwdrivers.

  • the reason its so expensive is because of Fireservice and Stamp Duty, the base premium is probably half the cost!

    fire service levies should be funded from council rates, not insurance. its rediculous.

  • I have all types of insurance. Contents, health and life (pays out if I am unwell and unable to work for an extended period of time, as well as death). It helps me sleep at night, and I can afford it. Knowing that my family is looked after if something were to happen to me (single income), makes me feel much better about things.

  • My plan for some things was to self-insure. Problem is that my spouse keeps forgetting that the money is set aside to cover emergencies, and we now have a new kitchen and no reserve fund.

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