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 £6million a year from selling legal cover add-ons to home and motor customers.
Insurance add-ons: Such policies are a huge money spinner for insurers
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 complaints 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.
Good quality home cover will include accidental damage to home and contents. 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 insurance 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 the cover), according 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.
Our ‘bolt-on’ policy was worth it after I lost my £3k Cartier watch at a festival
For Janette Gallier, paying for personal possessions cover as an add-on to her Halifax home insurance was worth the extra cost.
Janette, 62, a first-aid trainer from Uttoxeter, Staffordshire, lost a treasured Cartier watch at an art festival last summer. It had been a gift from her husband Graham and was worth £3,000.
Janette, a keen artist, claimed on her home policy and received £1,400 after the £100 excess. ‘With the payout I have been able to replace my watch,’ says Janette. ‘I have had this cover for more than 15 years and this was the first time I have had to claim. There was not a big increase in the annual premium at renewal. It was great to have the extra cover in place. I was devastated to lose my watch.’
Payout: Janette Gallier, who lost her watch at an art festival, received £1,400
If your home contains many expensive gadgets, jewellery or designer clothes, you may want to cover them when you are out and about.
Most home contents policies will not cover loss or theft of items outside the home. To make sure they are covered, opt for ‘personal possessions’ cover – also known as ‘all risks’.
Up to one in three cases where a home insurance claim is declined relates to an item outside the home when the policyholder does not have this element as part of their cover. Martyn James, at Resolver, says: ‘I’d argue that if the extra cover is necessary – which the number of declined claims suggests – then insurers should put it in the main policy.’
Cover for expensive phones, cameras, watches and jewellery could prove invaluable should the worst happen, particularly in the summer months when people are more likely to go on holiday, take weekend breaks, attend weddings, parties and festivals.
But check the exclusions – if something is stolen from a hotel room, for example, an insurer may only pay out if there has been forced entry. Also, typically there will be an excess to pay on the claim. If the items are worth little more than the excess, there is no point in claiming.
Individually priced personal possessions cover can be expensive – increasing annual contents-only premiums by as much as 50 per cent. Renewal premiums are also likely to rise following a claim so for many policyholders it may not be worth the extra outlay.
For those with valuable items, consider a standalone gadget or jewellery policy – do not just accept the policy pushed by the retailer you buy from.
Worldwide cover for loss, theft and accidental damage to wedding and engagement rings, phones and laptops may only cost from a few pounds per month, and there is no excess when you claim, unlike with household cover.
Protect Your Bubble, Switched On Insurance and Debenhams are among the best for value.
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 dismissal to contractual disputes with builders for poor workmanship.’
Claim: Philip and Christine Lee used legal cover
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 legal 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 side of the road and collided head-on with their vehicle.
Philip and Christine spent more than a week in the trauma unit at hospital 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 for almost three 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.
Drivers DO want the extras… but included as standard
Motorists want add-ons to their car cover, a recent survey reveals. The most popular are windscreen cover, fuel discounts, courtesy car, personal injury and breakdown cover.
Two in five say they are prepared to pay more for such ‘extras’, including windscreen cover, courtesy cars and personal injury cover. The best comprehensive policies already incorporate these. The message is clear that insurers should include them as standard.
Damage: Motorists want windscreen cover
This is emphasised by findings in the report, from consumer insight specialists Decision Technology, that the more add-ons offered during the online purchase process, the less likely the consumer is to go ahead and buy the insurance.
Dr Henry Stott, author of the report, says: ‘While a few valuable add-ons can be appealing, we found that offering too many extras had a negative effect for consumers. It can be harder to navigate the insurance buying process and more difficult to compare policies. This caused more consumers to switch off.’
Rules introduced by the regulator the Financial Conduct Authority two years ago mean it should now be less likely that consumers will buy extra cover they do not want.
These banned the practice of making policyholders ‘opt out’ of additional extras before purchasing.
Instead buyers are asked to ‘opt in’ to additional cover they may want, such as personal injury or courtesy cars.