New research has highlighted a sharp increase in the excess costs consumers have to pay when making insurance claims.
Your insurance excess is the sum you must pay in the event you make a claim, after which your insurance company will step in and settle the remainder.
The average excess insurance claimants are charged has risen significantly since 2008, according to Defaqto – with costs rising across all forms of insurance, from travel cover to car insurance policies.
Increased insurance excesses
Defaqto’s study highlighted travel insurance excesses as particularly problematic. While just 11% of travel insurance policies had an excess of £100 or more in 2008, more than 23% of today’s policies charge excesses at this level.
Meanwhile, in 2008 68% of policies charged excesses of less than £75, compared to 55% in 2011.
More than half of all home insurers now demand an excess of £100 or more when policyholders claim, compared with just a third of firms three years ago.
A similar trend is visible among car insurance providers, according to Defaqto’s study.
Multiple excesses charged by insurers
Just as worryingly, charging multiple excesses on the same policy is an emerging trend among insurers.
Some travel insurers may now levy more than one excess per policy, with different aspects of the cover on offer attracting individual excesses when claims are made.
For example, if your baggage was lost while you were away and you were also unlucky enough to need medical attention abroad, you might have to pay two excesses as the claims for each incident would fall under different ‘aspects’ of your travel insurance policy.
‘This is of concern,’ says Which? insurance expert Dan Moore, ‘because many consumers may not realise that their insurance policy works in this way.
‘Should an individual unexpectedly end up paying more than one excess in an emergency, they might feel an insurance policy they initially saw as good value has ended up leaving them out of pocket. Therefore, it’s vital to check the small print of any insurance policy you sign up for to ensure you understand fully how the excesses attached to it will work if you need to make a claim.’
Cheaper premiums, higher excesses
When buying any form of insurance, it’s important to note that the voluntary excess you agree to pay will be in addition to the compulsory excess charged by the firm.
Many price comparison sites now allow users to increase the voluntary excesses attached to policies in order to see how much cheaper this might make premiums overall – and if you opt for a higher excess, it is vital to calculate how much you might have to pay out in total should you need to claim on your insurance.
‘It’s crucial to make sure the excess you might be charged on any insurance policy is affordable for you,’ says Dan Moore. ‘Otherwise, in an emergency, you may be left in serious financial difficulty by claiming on your insurance – rather than finding it the straightforward safety net it should be when something goes wrong.’
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