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Which offers the best value for money?

Discussion in 'Superannuation, SMSF & Personal Insurance' started by Andrew Newman, 18th Jun, 2009.

  1. Andrew Newman

    Andrew Newman Well-Known Member

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    Hi All

    I thought I would put forward another question about insurance.

    Which offers the best value for money?

    1. Your home is worth $500,000 and your home insurance premium is $800 pa.

    2. Your car is worth $50,000 and your car insurance premium is $1,000 pa.

    3. Your earning power is worth $4,000,000 and your income protection premium is $750 pa.

    The above estimates will vary depending on the situation.

    What do you think - 1, 2 or 3?

    Cheers
     
  2. AsxBroker

    AsxBroker Well-Known Member

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    3 :)
    Unless your not working...
     
  3. Andrew Newman

    Andrew Newman Well-Known Member

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    Come on everyone - 1, 2 or 3?

    Cheers
     
  4. dudek

    dudek Well-Known Member

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    Number 1. When everything fails you always have home to go back.
     
  5. Andrew Newman

    Andrew Newman Well-Known Member

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    Hi dudek

    What if there is a mortgage on the home and you can't meet the repayments - could the bank take the home?

    Cheers
     
  6. dudek

    dudek Well-Known Member

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    Andrew,

    What was the question again?
    Can the bank take your home or what is the best value?
    Hard to win with the bank but you can always try to negotiate your way out of trouble.
    If you have problem with 500K loan then point 2 and 3 does not apply.
    $800 p/y does look a good value to protect your family nest and all emotional attachment coming with it.
     
  7. Andrew Newman

    Andrew Newman Well-Known Member

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    Hi dudek

    But if you are eligible to claim on an income protection policy, then 3 becomes very important!

    Cheers
     
  8. dudek

    dudek Well-Known Member

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    Andrew,

    If you ask me if $750 is a good value to protect 4mil income I’d say YES!
    But if you ask me to choose what is the best value compare to other scenarios I don’t think you can put value on people’s emotions.

    Three scenarios you presented don’t stick and one will never have to make such a decision.
     
  9. Andrew Newman

    Andrew Newman Well-Known Member

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    Hi dudek

    The scenarios are real. When you own a home, you decide if you want to insure it - similarly for your car and your income.

    Doing nothing or not knowing, is still making a decision!

    Unfortuntely, 3 rarely comes up first on the list.

    Cheers
     
  10. Tropo

    Tropo Well-Known Member

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    Well...I vote for number 5! :p
     
  11. Glebe

    Glebe Well-Known Member

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    If the house is an investment property, it may have earning power of $4 000 000 also. In fact, it's earning power may be much more than the earning power of the individual. The question is worded to favour option c.
     
  12. Andrew Newman

    Andrew Newman Well-Known Member

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    Hi Glebe

    The home I refer to is where you live and does not generate income.

    The earning power of an investment property can be substantial but how many investors would have insurance - almost everyone?

    However, when it comes to the earning power of an individual, how many people would have insurance - very few?

    Cheers
     
  13. Waimate01

    Waimate01 Well-Known Member

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    Dear oh dear. To calculate the "best value" requires knowing the probability of a claim for each scenario. Excluding that factor is really just asking people to admire the nice shiny bauble.

    In reality, the "value" of each is probably about the same, as you can be damn sure the insurance companies have calculated the probability of various sized claims.

    But if the question is which has the most appeal, then for many readers of this website the answer will be "1". Many people can self-insure when it comes to their car, even though prudence will dictate most probably will not self-insure. Self-insuring your house is quite a different matter. And if your income is the result of your investments and not your personal extertion, then insuring it is unnecessary (quick, find some wood to touch!).
     
  14. Andrew Newman

    Andrew Newman Well-Known Member

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    This is exactly what I am saying - but why?

    The income referred to is not from investments but personal exertion.

    Cheers
     
  15. Waimate01

    Waimate01 Well-Known Member

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    The "why" is explained in the rest of the paragraph.

    A car is self-insurable. A house rarely is. That takes care of "2". Many readers of this forum do not rely on exertion-based income. That takes care of "3". There's your "why" !
     
  16. Andrew Newman

    Andrew Newman Well-Known Member

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    Some readers perhaps but most readers would rely on personal exertion for their income requirements.

    Therefore, securing your earning power is very important for most people.

    What if you side swipe a Ferrari and you have no insurance? Big trouble!

    Cheers