Things to look out for when buying insurance
You’re about to buy an insurance policy. Before you commit, run through this checklist to make sure you know what you’re buying.
- Beware of buying insurance offered alongside something else
- Have you shopped around?
- Have you compared like with like?
- Does the policy cover everything you need it to?
- Have you answered all your insurer’s questions truthfully and accurately?
- Do you need expert advice?
Beware of buying insurance offered alongside something else
For example you may be offered:
- buildings and contents insurance, life assurance and critical illness cover when you take out your mortgage
- warranty insurance when you buy a new washing machine or computer
- travel insurance when you book a holiday
- payment protection insurance with goods bought from catalogues
If you need this insurance, you may get it cheaper with better cover elsewhere.
Have you shopped around?
Go back to your existing insurer with a cheaper quote from somewhere else and you could drive down the price of your renewal quote.
Don’t compare on price alone as the cheapest policy isn’t usually the best cover for your needs, and it is important to compare both the price and the level of cover. Try to get at least three quotes.
There are many different ways to buy insurance, here are the main ones:
- an insurance broker or independent financial adviser
- comparison sites and online insurers
- banks and building societies
- supermarkets and department stores
Don’t assume that insurance bought over the internet or from a comparison site is automatically cheapest, or offers the best cover. If you’re looking for car or home insurance, then comparison sites are a good place to start. But remember that no comparison site covers all the insurance companies.
Get quotes from more than one comparison website and look at them alongside quotes from insurers who don’t appear on comparison sites.
Have you compared like with like?
Watch out for how different charges, types and levels of cover, and your excesses are calculated when you compare policies.
For example, some insurers set their voluntary excess (the amount of any claim not covered by the insurer) at a high level to make sure they come out cheapest on comparison sites.
When comparing policies and prices, make sure that the features you are comparing – such as excess amounts – are similar.
If you are buying from a comparison site, remember to check the level of cover you’re being offered – insurers often cut down on cover to make sure that they’re the cheapest.
Does the policy cover everything you need it to?
Nearly half of us don’t know what our insurance covers. It’s only when we come to make a claim that we find out, sometimes with disastrous consequences.
Read the policy document. At least check the features that are important to you in the policy summary. Otherwise, you are potentially wasting your money and might not be covered when you really need it.
If you have already bought a policy, you have 14 days (30 days for life, income protection, payment protection and critical illness policies) to change your mind if you decide the policy isn’t suitable for you. However, for home and car insurance you might have to pay an administration charge and the cost of any days already covered.
Have you answered all your insurer’s questions truthfully and accurately?
Whether you’re applying online, by phone or by application form, make sure you take reasonable care to answer all the insurer’s questions honestly and to the best of your knowledge. If you don’t, your policy may be cancelled, or any future claim could be rejected or not fully paid out.
Do you need expert advice?
If you have an unusual car or a house that is of a non-standard construction, using an insurance broker may get you a better deal.
Some types of insurance – such as critical illness and income protection – vary widely and have complex terms and conditions. If you’re buying this type of insurance, it’s worth getting an adviser to help you find the best policy to suit your needs.