SAVE ON INSURANCE PREMIUMS
From broken phones to legal expenses, insurers are hiking up premiums with a raft of ‘add-ons’
INSURERS increasingly lure customers into buying home and motor cover with a low initial price, then prey on fears and tempt purchasers to take out additional cover – charging extra for the privilege. Premiums for these add-ons are cleverly pitched at a low level so as not to deter buyers from making the final purchase.
Such policies are a huge money spinner for insurers. Direct Line revealed earlier this month it pockets almost £6 million a year from selling legal cover add-ons to home and motor customers.
Other companies cash in on the insurance extras trend, adding low premium ‘optional’ cover to go with purchases for theatre tickets, mobile phones and car finance loans.
Martyn James, of online com- plaints service Resolver, says many of these policies are unnecessary. He says: ‘Most are sold at the point of sale, meaning we tend to just click or tick to accept because it is not that much money and not doing it seems like a costly error.’
The reality is that the majority of these policies are never likely to be claimed on – resulting in big profits for the industry. James says: ‘Insurers should play fair. If these extras are considered necessary, then include them in the main policy.’ He adds: ‘You need to be strong to resist the pressure to buy certain policies. I turned down roughly 30 small insurance products on everything from train tickets to small gifts and delivery in the run-up to Christmas last year.’
Many people feel baffled by optional add-ons, are unsure of their value and are panicked into buying them. The Mail on Sunday takes a look at some of the most common extras and their benefits – or otherwise.
ACCIDENTAL DAMAGE
GOOD quality home cover will include accidental damage to h o me a n d c o n t e n t s . But increasingly this cover is excluded for contents – and homeowners need to decide whether to add it for an extra premium.
Around 40 per cent of all home i nsurance claims are for accidental damage, according to the latest data from insurer Aviva. Common claims include accidental damage to televisions, laptops, tablets and mobile phones as well as damage to flooring, such as cracked tiles and spills on carpets. Yet just 16 per cent of home contents policies include accidental damage as standard (meaning you do not have to pay an additional amount for t he c o ver ) , a c c o r di ng to researchers Defaqto.
Hannah Maundrell, of comparison website money.co.uk, says homeowners need to weigh up the costs and the risk. She says: ‘It can be hard to gauge the optimum level of cover. Buying the optional add- ons may result in you paying more than you would ever need. Purchase too little and your provider might not pay out when you come to claim.’
Maundrell says it is a good exercise to regularly assess the value of contents in your home – particularly new larger or expensive items, such as furniture and flooring. If you know it would be a stretch to replace them, then paying an additional premium can be worth it.
If you have young children or lots of guests at your home, this is another reason to think about the add-on as accidents may be more likely. Be aware that if damage is caused by paying guests – for example if you are an Airbnb host – then you will not be covered.
Accidental damage cover is priced on your individual risk. But as an example, contents- only cover for total possessions worth up to £50,000 in a three-bedroom house in Sheffield would cost from about £46 a year, according to website Comparethemarket. Yet adding accidental damage cover would only increase this to £48 for the year.
Policyholders would have to pay £350 as an excess – the amount you must contribute towards any claim. So this cover may not be suitable for those who may need to make smaller claims. Opting to reduce this excess, to £200 for example, will push up the annual premium.
LEGAL EXPENSES
THIS cover can help when an incident requires legal input, perhaps a personal injury claim, tax disputes with the Revenue & Customs, a falling- out with neighbours over property or if you lose your job.
You need to decide whether you are actually ever likely to claim. If you want advice on a row with a neighbour over noise, then a free visit to Citizens Advice might be enough.
But given the potentially high cost of legal disputes and actions – which can run into tens of thousands of pounds – many consumers choose to purchase the cover for peace of
mind. Expect to pay around £30 per year on top of your annual premium. There is usually a maximum claim limit, such as £100,000.
Martin Scott, head of home cover at Churchill Insurance, says: ‘Legal expenses cover can provide support, protecting householders from legal costs relating to a wide range of issues from personal injury claims following accidents at work or employment disputes for unfair dis- missal to contractual disputes with builders for poor workmanship.’
Motor insurance legal expenses cover can be useful if you are involved in an accident – being hit by an uninsured driver, for example – or you want to reclaim an excess you had to pay in a claim that was not your fault. Usually a free legal helpline is included.
Sometimes comprehensive cover will include legal expenses so check before purchasing separately. By choosing to add legal expenses cover for both your home and motor policies you may not necessarily be ‘doubling up’ on cover.
Kevin Pratt, insurance expert at MoneySuperMarket says l egal expenses protection for home and motor policies will cover different areas. ‘Motor legal expenses are usually restricted to your car and motoring while home legal cover relates to property, employment and consumer rights.’
Some bank customers with premium or packaged current accounts may already have legal cover thrown in so check before buying.
Retired civil servant Philip Lee, 61, from Newcastle upon Tyne, and his wife Christine, 61, a retired nurse, made a claim under legal expenses cover on their motor policy after a serious road accident in 2016.
Philip and Christine were driving home after a day trip when a motorist on the opposite side of the road blacked out, veering on to their si de of t he road and collided head-on with their vehicle.
Philip and Christine spent more than a week in the trauma unit at hos- pital and suffered fractured ribs, cuts and bruising.
Philip also fractured his sternum and Christine broke her collar bone and fractured her ankle.
At the time the couple were both still working. Philip was off work f or al most t hree months and Christine was away for almost five months leading to a loss of earnings.
Philip says: ‘The accident has had a long-term effect on us. Christine still struggles with pain in her ankle. Thankfully we were able to claim under our legal expenses cover and we both received substantial payouts worth tens of thousands of pounds. It has certainly helped during a stressful time.’
HOME EMERGENCY COVER
INSURANCE for home emergencies covers a crisis such as a broken boiler or plumbing leak – but as two-thirds of households never claim, they can be a waste of money. Such policies are sold as a bolt-on to standard home insurance or as a standalone policy from providers such as British Gas, Homeserve and the AA. But behind the special offers to lure you in can be deals that offer poor value for money. For example, British Gas charges £18 a month for a HomeCare package covering the boiler, drains and plumbing that also includes an annual service. That peace of mind costs £ 216 a year. The money might be better salted away in a savings account with perhaps £100 a year used for an annual service and the rest kept aside for further repairs. Remember, if anything goes wrong under an emergency cover policy there is usually an excess fee of £60 or more. While the cover may boast of a 24- hour emergency hotline, that does not mean someone will fix a problem within that time. Many heating systems are also already covered under a manufacturer’s warranty or home insurance policy – so check first.