Insurance rip-offs: the car, life, travel and home cover you really don't need
We all know that some insurance policies are vital: you wouldn't get very far without your car or home insurance.
However, some cover is completely pointless, even for the select few it's actually targeted at.
Measly payouts, needlessly high charges and punitive exclusions are just three of the things you need to watch out for.
A lot of these policies are add-ons, so have a look at the small print to decide if they're worth it. While you're at it, check out your existing insurance policies to make sure you don't over-insure by covering the same product on multiple policies.
That said, the Financial Conduct Authority (FCA) conducted research that found poor value in both add-on and standalone insurance products. Its figures are based on how much insurers fork out and how many people actually claim relative to the number of policies taken out.
So don't waste your time with these, they're utter mince!
Extended warranties
Basically, extended warranties cover faulty goods after a manufacturer's warranty expires, but it's totally superfluous.
Under the Consumer Rights Act, you'll be able to return faulty goods up to six years after you've bought them (five in Scotland), but after six months it's your responsibility to prove that the product was faulty at the point of purchase. Plus some companies offer longer warranties as standard.
At this point you should check if you've got warranties under your home insurance or through your packaged current account. The Nationwide FlexPlus Account gives you an extra year on top of the manufacturer's warrantee expiring.
Car hire excess waiver from car hire companies
Car hire excess waiver, aka super-collision damage waiver promises to lower or waive your vehicle excess if your hire car is damaged.
It's commonly sold to you when you rent out the car, and that's where you'd be going wrong. Car hire companies charge you an outrageous amount compared to alternative providers.
Travel Supermarket says that you can save up to 65% by going with a standalone policy. The add-on price can cost as much as £25 a day so it's worth finding a standalone, which can cost as little as £2.99 a day.
Handbag insurance
Typically sold as an add-on to car insurance, handbag insurance covers your bag and/or its contents against theft or damage.
It's best avoided because the level of cover is pretty low considering that smartphones, tablets and other devices are worth a small fortune.
You're better off adding the personal possessions cover onto your home insurance policy for an extra fee.
Cosmetic car insurance
Again, this is normally a car insurance add-on. It covers minor cosmetic damages like paintwork chips and small dents.
It's the exclusions you've got to watch out for with cosmetic car insurance. Many only cover scratches up to 15cm and bodywork chips up to 15cm long, among other things.
Maximum payout caps and limitations on call-outs per year can make these policies quite restrictive.
If you've got a comprehensive car insurance policy you'll be covered but remember you'll need to fork out for the excess.
Over 50s life insurance
We've all seen the TV adverts with Parky and the free clock, but over 50s life insurance is a bit of a rip-off. You'll probably end up paying in more than you can ever claim.
The only people that they could work for are those who don't expect a long and healthy life as over 50 plans don't need medical screening to take out a policy. On a traditional life insurance policy they'd be paying a lot more.
There's a good chance you'll be better off putting the money into a high-interest current account.
Gadget insurance
Smartphones, tablets, laptops, cameras, music players, ebooks and GPS devices can cost a hefty amount and many of us carry them around every day. But do you really need gadget insurance?
Getting cover for personal possessions outside the home on your home insurance policy is a better way to go.
Though it would probably be replaced quicker with gadget insurance, you'll ultimately get a better deal through your home insurance, despite the extra fee to add the personal possessions onto the home cover.
Personal accident insurance
Personal accident cover pays out if the policyholder dies or suffers long-term injury as a result of the event.
The number of exclusions involved can render personal accident insurance useless though. You won't be covered if the illness or accident is caused by "sickness, disease or any naturally occurring condition or process".
Accident, sickness and unemployment (ASU) insurance generally has wider coverage and fewer restrictions, but it does cost more. Even so, it would save you more in the long run. With ASU cover you'll get a proportion of your income for up to 12 months to help with your outgoings if you become too sick to work.
In the meantime you can keep your health in check with private medical insurance.
Travel insurance as an add-on
Ever booked your holiday travel and then got offered travel insurance? Convenient though it is, don't tick the box. You can get standalone travel insurance an awful lot cheaper.
At this point it's also worth checking if you've got travel insurance connected to your bank account and what it actually covers.
Key cover on home insurance
Key cover insures you if you misplace your keys. Some will get you back into your home if you've locked your keys inside and pay for public transport costs you incur as a result of not having keys.
It only costs £10-£20 a year, but key cover on your home is quite the rip-off. As with many add-ons, it's hideously overpriced, not to mention a tad pointless.
FCA figures show that only 0.5%-1% of claims were made from people who took out the policy, meaning that virtually nobody claims on it. To be honest, it's probably quicker and easier to go to a locksmith.
Home emergency insurance
Home emergency is typically an add-on to – you guessed it – home insurance. So, if your boiler breaks down, your drains get blocked or you have an electrical fault, someone will come and see to it.
Some will also offer alternative accommodation for the night if you need to be away from home.
You'll still need to cover the cost of repairs and the total value of claims per year though. Before you sign anything, make sure you aren't already covered for these emergencies by your home insurance policy as some include this as standard. Some water pipe companies will also do repairs for free and some appliances will be covered under their warrantee, so make sure you're not paying twice.
Some packaged bank accounts offer home emergency cover too, but check those exclusions first.
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