Consumers are being left out of pocket because their insurance routinely falls short of expectations, according to a study carried out by the Chartered Insurance Institute (CII). The survey of 2,004 adults, by the body that oversees professional qualifications, uncovered a poor level of understanding about key aspects of home, travel and motor insurance cover, which can leave claimants with unexpected bills.
To try to counter some of these misunderstandings, the organisation has created AskCiindy.com, a website where the avatar Ciindy provides answers to insurance questions. It is not comprehensive: when Times Money tested it this week with specialised questions, Ciindy’s knowledge fell short and the site seemed to be having some technological teething problems. However, if you are unsure what a no-claims discount is, or want to know whether your travel insurance will cover scuba diving or bungee jumping, it may be of help, and it is free.
To ensure that you don’t face an unwelcome shock when making a claim, Times Money has compiled ten of the most worrying misconceptions about insurance.
1. If you have an accident driving somebody else’s car your comprehensive policy will pay to repair or replace it
No it won’t: one in three drivers questioned by the CII wrongly believed that they would be fully covered by their insurance policy if driving another car. Although comprehensive cover will allow you to drive another car, with the owner’s permission, it will only provide third-party cover. This covers the costs of any claims made against you if you kill or injure someone else or damage their vehicle, but not damage to the vehicle you are driving.
David Ross, of the CII, says: “The legal elements that underpin motor insurance are complex and are understandably challenging for the average consumer. Should the worst happen, this could mean that consumers are left out of pocket or they end up paying for cover twice because they never knew they had it.”
2. Third-party insurance is cheaper than comprehensive
Insurers assume that people who take out third-party cover are more likely to make a claim than those who take out comprehensive cover and so it is not always cheaper.
3. No-claims discount protection means your premiums won’t go up if you have to claim
Most insurers offer to protect a driver’s no-claims discount for an additional fee, but what few drivers realise is that this is often limited to the first or second claim. It is not uncommon for a driver to have to claim on their insurance two or more times in a year through no fault of their own and after this they would be likely to see the cost of their insurance rise significantly — even if they have no-claims discount protection.
4. You have to top up your insurance to drive on the continent
By law, UK car insurance must include cover for the driver while in the EU, although this will only be minimal cover to meet statutory requirements.
5. You can cancel at any point at no extra cost
Insurance is usually sold on an annual basis and even if you pay by instalments you will have agreed to a 12-month contract. Generally you can cancel your policy at any time as long as you haven’t made a claim, but you may still be responsible for paying the rest of the instalments, as well as any cancellation and administration charges.
6. Money stolen from your home will always be covered
Britons have around £3 billion stashed away under the mattress, with the average hoard worth £345, according to a survey by the Bank of England. You need to take care if you have larger amounts stored at home.
Dan Simson, the head of home insurance at Privilege, says: “Most insurers will only replace money stolen from the home up to a very limited amount. In the case of Privilege, our standard home insurance policy covers people up to £500.
“It’s a little known fact that things like gift vouchers, cheques, postal orders, savings stamps, Premium Bonds, travel tickets, travellers cheques, phone vouchers and even postage stamps fall within this definition.”
7. A home policy protects everything on your property
Most home insurance policies will not pay out to replace your fence or shed if it is blown over by a storm because they are so flimsily constructed. However, home contents cover will usually include a limited amount of garden furniture and plants. These rules are fairly standard across the industry, but check the small print.
8. You can tailor quotes on a price comparison site
Some price comparison websites default to a set excess, no matter what amount you requested. For example, even if you request a £100 excess, you may be offered policies with £250 excesses, so it’s worth double-checking this before you proceed with the purchase.
9. If you have a serious medical condition diagnoised after taking out cover, you are not obliged to tell your insurer
Many people assume that if they have already bought a policy that they don’t have to inform their insurer if they are diagnosed with, say, diabetes or cancer. However, failing to do so could jeopardise your cover if you have to make a claim. Depending on the nature and seriousness of the condition, the insurer may extend your cover to include the new condition for an additional premium or may withdraw it if they cannot cover it.
10. Your bank account provides all the insurance you need
Travel insurance is often one of the perks of paid-for packaged bank accounts. Most “freebie” policies will not, however, cover winter sports or lost luggage. It is worth checking how comprehensive the insurance is before you leave.