Choosing the right insurance policy is never as straightforward as it may seem. Even if you think you have found the right cover, insurers will often tempt you with a range of extras to bolt on to your policy – provided, of course, you pay a higher premium. But are these ‘add-ons’ a waste of money?
Danny Butler, of personal finance comparison site Finder.com, says: ‘Insurance providers profit from including add-ons. With most offered persuasively at the point of sale, it’s tempting for customers to buy them without always knowing if they really need them.’
Sometimes comprehensive car or home insurance policies will automatically include extras such as legal expenses, windscreen, breakdown and accidental damage cover. But in most cases, customers are expected to pay more for them.
Washout: Choosing the right insurance policy is never as straightforward as it may seem
Martyn James, of online complaints service Resolver, says: ‘The main issue is why are insurance companies charging extra for add-on policies when many people might expect their standard policy to cover them?’ The key to choosing add-ons lies in picking those most likely to provide value for money, rather than those unlikely to be used. Lee Griffin, chief executive of price comparison site GoCompare, says: ‘If you found yourself in a situation where the additional elements of your cover are able to help or compensate you, it could arguably be the most valuable bit of insurance you’ve ever bought.’
With car insurance, the most useful extras include breakdown and legal expenses cover. Freddy Macnamara, chief executive of flexible car insurance provider Cuvva, says: ‘When you’re involved in an accident that’s not your fault, legal expenses cover means you can often claim back any costs incurred through expenses resulting from the accident. This add-on can also avoid major headaches when trying to recover your excess if you weren’t at fault.’
Legal expenses cover, which usually includes the cost of hiring a solicitor, can also be attached to home insurance. But James says: ‘There’ll be a limit on what legal services are available and a maximum amount that will be paid. More importantly, the insurer will consult with its panel of solicitors and will only fund a case if it thinks there’s a high chance of it succeeding.’
Someone taking out car insurance with Tesco Bank could pay £390.50 a year for a comprehensive policy that automatically includes legal expenses and breakdown cover.
In comparison, a car insurance policy without these add-ons would cost £323.68 with Admiral. Adding legal expenses would cost £29.95, while breakdown cover would cost £90.45, taking the total cost to £444.08 – or £54 more than Tesco’s price. Adding accidental damage cover to home insurance can be useful for households with young children, while home emergency cover can be invaluable if the boiler packs up or a pipe bursts.
Catherine Marsh, head of home insurance at More Than, says: ‘Home emergencies can cause significant disruption to people’s daily lives and are unfortunately commonplace. We receive roughly one of these claims every hour.’
Add-ons can be riddled with exclusions, so check the small print. For some, it may be more cost-effective to put money aside in a savings account to help fund emergency costs. Those thinking about breakdown cover, for example, may want to compare the insurer’s price against standalone cover from the likes of the AA and Green Flag.
It is also wise to check whether you have cover already in place – for example, through a credit card or bank account.
Finder’s Butler says: ‘I’d recommend comparing and reviewing each provider in detail and defining what you definitely do need covered and what you can live without. Ideally, look for an insurance provider that includes as many of these add-ons into their comprehensive policies as standard.’