Insurance fees that can cost more than a claim

Firms hike excesses so high your cover becomes pointless

‘Learn lessons the hard way’

HOMEOWNERS, holidaymakers and drivers are being sold insurance policies that impose bigger fees than the value of claims. Many major insurers are charging excesses – fees you pay when you make a claim – that can be higher than the claim itself, an investigation found.

This means it can be pointless trying to claw back anything from the policy. In some cases the maximum a customer can claim is so low they are forced to pay extra for repairs. Sometimes they are hit with massive charges for simple things such as changing the name on a policy.

Researcher Fairer Finance found some firms charged a £100 excess to claim up to £100 of sto- len cash. Others have a £500 excess to claim £350 for dental treatment.

Some firms limit claims for changing the lock on a car to £300, even though the average cost is £700.

James Daley, managing director of Fairer Finance, said: ‘People do not realise that insurance is becoming worse quality in front of their eyes.

‘Unfortunately they often have to learn the lessons the hard way. A policy isn’t worth the paper it is written on if it doesn’t cover core things.’

He added: ‘To claim that a customer is covered for having their car keys stolen or for losing their cash when the excess is bigger than the cost of the policy is deception in my book.’

Insurance companies have been caught in scandals in recent years. A Mail campaign recently led to firms being forced to end a practice of imposing massive hikes on premiums from one year to the next.

The latest research by Fairer Finance found that Zurich, AA and InsureandGo are among household names with payout limits that are lower than or equal to the excess on their policies.

The excess is the part of any claim that the customer has to fund themselves. Researchers found one in ten travel cover policies offered a maximum payout of £100 for lost or stolen cash – but imposed an excess of £50.

But 14 policies had a limit that was equal to or lower than the excess. That meant the customer stood to gain nothing by submitting a small claim.

Zurich’s basic cover has a £100 cash limit and a £100 excess, as does InsureandGo’s Budget cover.

This means if you claim for losing £400 cash while on holiday, the £100 excess is taken off, leaving £300 – but you will still only be paid back £100. By contrast, if you claim for a loss of £100, the excess will wipe out the whole amount and you will get nothing back.

Direct Line, one of the largest motor insurers in the UK, now charges £48.16 for cancelling a policy – up from £26.25 in 2010. A spokesman said: ‘We disclose our fees at the point of purchase.’

The AA’s Essential Travel Cover has a cash limit of £100 with a £150 excess. An AA spokesman said: ‘The excess becomes trivial in the event of major costs for injury or illness, which is what most people buy travel insurance for.’

An InsureandGo spokesman said: ‘If you chose the Budget policy and you lose more than £100, it’s still worth your while to make a claim as the excess is taken off the total that’s lost.’

A Zurich spokesman said customers should pick the cover that best suits their needs.