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Updated: 3 Feb 2019

Eight insurance myths debunked: what you need to know about your policy

Can you spot the errors in our insurance quiz?

You may think you understand the insurance policy you signed and paid for, but some widely believed insurance 'facts' are little more than fallacies.

Which? surveyed 2,099 people to identify common misconceptions about insurance policies. Half the time, people believed fiction over fact, andand one question was only answered correctly by one in ten of respondents.

Which? reveals some of the most common insurance terms that confuse policyholders and explains how your cover really works.

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Take the insurance quiz yourself

Take our online quiz, below, to see how well you do - then read on to see how you fared compared to those in our survey.

Most convincing insurance myths

Consumers in our survey, carried out last October, read through eight statements and were asked to judge which were true and which were false.

Cancellation fees

63% believed the myth

Just 17% of respondents knew that leaving an insurer within the 14-day 'cooling off' period can entail a cancellation fee. Some 63% thought that no fee will apply, while the rest simply didn't know.

With most insurance products, you do have a statutory right to cancel without penalty within the first 14 days. However, insurers can still charge you any costs they've incurred for setting up a policy and many do.

The meaning of 'fault'

55% believed the myth

We asked whether you need to have caused, or be partly to blame, for a car accident for it to count as a 'fault' claim. It's testament to the topsy-turvy nature of insurance jargon that only 11% were able to call this out as false.

In insurance, 'fault' is another word for liability - in other words whether or not your insurer has to pay out in a claim. While this includes accidents for which you bear a portion of the blame, it can also include cases where responsibility has not been established and the insurers have agreed to split the difference.

Fault can also apply in cases where you weren't remotely to blame, but there's no other traceable insurer to pick up the tab. For example, a common example is if your car is damaged by a passing driver while you weren't present.

Does no claims discount protection freeze your premiums?

49% believed the myth

By keeping in place your hard-won no claims discount or no claims discount protection (NCDP) can potentially save you lots of money. However, the discount is just a percentage off your premium, and your insurer is free to change your premium however they see fit.

While 34% of those in our quiz correctly spotted this, almost half thought NCDP could prevent your premium from increasing. Worryingly, 24% of those said their current insurer had given them this (inaccurate) information. There are simple steps you can follow to get the best available deal, but there's no watertight way to prevent your premiums rising.

Four out of every ten travel insurance claims are rejected

37% believed the myth

We wove a phoney statistic into the mix to see whether it would be spotted.

The most recently published figures from the Association of British Insurers indicate that in 2016, 13% of travel insurance claims were turned down.

This isn't particularly good (around 2% of car insurance claims were rejected over the same period) but our four in 10 claim was certainly an exaggeration. Just 18% of people called us out on this.

Other insurance misconceptions

More than a third (35%) of those participating in our quiz believed that if your second-hand car was stolen or written off, your insurer would pay you the required amount of money to buy a replacement of the same make and model.

This isn't quite true: insurers will pay the estimated value of your car prior to the claim, which takes into account its specific mileage, history and condition, so it can't be relied on for a like-for-like replacement.

Meanwhile, 25% thought we were lying when we stated that home insurers are allowed to turn down a burglary claim if you've detailed your holiday plans on social media.

While this isn't common, if an insurer thinks you've recklessly made the chances of a burglary more likely, they may assert that you haven't taken 'reasonable care', which is a condition of your cover under most policies.

Our survey respondents didn't always take our bait. 70% were clear, for instance, that your insurance risk can change over time, regardless of whether your circumstances have changed. And 46% saw right through us when we bluffed that home insurance accidental damage cover only applied if you are present when the damage occurs.

Where the myths come from

Where those in our survey gave an incorrect answer, we asked them to tell us where they'd got their information.

Most commonly, participants told us: 'It's just something I've always heard/thought', followed distantly by 'friends and family'.

What you need to know about insurance

Many myths that can trip up insurance customers (potentially at severe cost) make perfect sense at face value. As our chart above shows, the main source of incorrect information was just personal belief.

However, we found that for each question, around a fifth or more respondents admitted they didn't know whether the statements were correct or not. It's better to concede this than to rely on a hunch.

If you're uncertain of the basics, do your research. Check our online guides to insurance as a starting point.

It's vital, though, to check the cover in your policy. Some misconceptions people have about insurance are actually true some of the time.

For instance, 20% of respondents in our survey felt it was 'always or often' true that comprehensive car insurance enables you to drive anyone's car, including your own, with full cover. This isn't false for all policies - but it's rarely true, and could prove an expensive mistake if you presume the cover to be in place without checking.

Make sure you read your policy thoroughly. And if you're ever unsure about the wording in your policy, check with your insurer.

As previous Which? investigations have shown, insurance terms and conditions aren't always written as clearly as they could be. If you're not seeing straight answers in the policy document, it's best to admit you don't know and contact the insurer for some clarification.