Insurance claims: fact vs. fiction Top home and car insurance tips and myths

26 August 2010

home insurance

More than £19bn was spent on car and home insurance policies alone in 2008, according to the Association of British Insurers.

Yet many people still don’t understand how everyday forms of insurance work, and run the risk of under- or over-insuring themselves when they buy cover.

At best, this might leave you paying more than is necessary for your policy; at worst, it could mean you’re bitterly disappointed in the event you need to make an insurance claim.

Top five insurance claim myths

1. Your car is worth what you paid for it, not what you could sell it for

Many motorists assume that, when they insure their vehicle, they would get back what they paid for it should it be stolen or damaged beyond repair.

However, if your brand new motor is stolen six months after your drove it off the forecourt, depreciation will be taken into account when your insurer calculates what your claim is worth. The same is true of second-hand vehicles, though they are likely to decline in value less quickly than new cars.

Find out which car insurers Which? rates for quality, not just cost, by reading our Car insurance review.

2. If your home suffers subsidence, it will become uninsurable

Subsidence is usually covered under buildings insurance, but if you suspect your property may be at risk it is vital to check the terms and conditions of your policy.

Should you have to make a subsidence claim, it’s likely your buildings insurance policy will increase in price - and it is possible your insurer will refuse to cover you again.

However, buildings insurance for homes that have suffered subsidence is available. An insurance broker should be able to assist you, and you can search for one on the British Insurance Brokers’ Association (BIBA) website.

3. The European Health Insurance Card (EHIC) is a substitute for travel insurance

Although the EHIC will entitle you to any state-provided health care you need while travelling within the EU, it will not cover the cost of repatriating you to the UK should this be necessary. Nor will it necessarily provide the same standard of treatment you would get from the NHS at home.

In addition, a good travel insurance policy will provide you with protection the EHIC can’t – such as if you are robbed, have to cancel your holiday or if your baggage is lost.

4. There is an ‘act of God’ exclusion in most insurance policies

This is a very common myth – but, according to the ABI, the ‘Act of God’ exclusion does not exist.

Instead, insurance policies set out what events will be covered and list the main exclusions customers should be aware of. Make sure you know what you will, and won’t, be able to claim for are before signing on the dotted line.

5. It always makes sense to trust price comparison websites

While price comparison websites offer a useful service, it’s crucial to be aware that not all insurers are featured in their tables.

What’s more, you should consider the level of protection on offer from any insurance policy you buy as well as its price – so it’s a good idea to check whether the cover you’re considering comes from a Which? recommended provider.

Four top insurance tips

1. Always disclose relevant information to your insurer

Whether you need to mention a previous medical condition or the fact that you were recently caught speeding, full and early disclosure of facts that might affect your insurance policy will help prevent problems later.

Holding back information that is relevant to any future claim you make could mean you are refused an insurance payout when you need one.

2. Insure your home for its rebuilding cost, not its market value

If your home were badly damaged by fire or flood, it might need to be rebuilt from scratch. This is why only insuring your property for its market value could be an expensive mistake.

3. Consider improvements you’ve made to your home when buying insurance

Making home improvements such as putting on an extension will push up the cost of rebuilding your home, should this be necessary.

Be sure to reflect the value of work you have done to your home in the sum it is insured for, or you could be left out of pocket in the event you need to claim.

4. Keep your home contents insurance up to date

Remember that when you buy new things – particularly big ticket items such as a flat screen TV or new laptop – the value of your home contents will increase.

It’s important to make sure your home contents insurance policy provides you with an adequate level of cover, so don’t forget to tell your insurer if you purchase a new, expensive item.

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