Insurance is really big business and is a significant money-spinner for those that provide it, but how useful or indeed 'appropriate' are many of these insurance policies??
In recent times we have seen the great debacle of payment protection insurance (PPI) where banks and other financial institutions have been found guilty of 'mis-selling' PPI to consumers (i.e.: selling policies to consumers in circumstances where such a policy frankly was not appropriate or should not have been sold). Now it would appear that PPI is not the only form of insurance which has been missold. Insurance is being offered for anything from kitchen appliances to protecting your identity but in the vast majority of cases, the policies are useless and only duplicate the cover you already have under something like your home contents insurance. These policies also include small print which make it difficult to make a claim, contain unfair exclusions and are subject to inflated premiums.
So if these policies are often useless why are they being sold?? Simple, PROFIT, PROFIT, PROFIT, it is all about the profit and it would appear that the banks and financial institutions simply do not learn their lesson.
The Financial Services Authority (FSA) has stated that claims against insurance policies have increased by a third and they are monitoring the situation.
So what sorts of policies are causing the problems? The following are the most typical examples:
1. Kitchen Appliances:
These sorts of policies cover you for mechanical or electrical breakdown and if a repair is not possible, providing the goods are less than three years old, you would receive the full replacement value or if older than three years, a contribution towards the replacement.
Sounds good, but stop! Most white goods are sold with at least a one year guarantee and many of them now come with a three year guarantee. Under the Sale of Goods Act, 1979 an item must be (a) as described (b) of satisfactory quality and (c) fit for purpose. If, therefore, after say two years it breaks down and only had a year guarantee, you have a legal right to ask the seller to fix it.
You may be asked for an independent report but these can be obtained quite inexpensively from independent engineers or repair specialists, details of which you can get from the White Goods Trade Association. So with this being the case why do you need this insurance? You don't!!
2. Extended Warranties:
These are sold on a commission basis by the “High Street stores” and are intended to extend the guarantee if you have a mechanical or electrical fault from anything from six months to five years of you purchasing the item. They usually give either a replacement or repair.
As above, under the Sale of Goods Act, 1979 you are protected so again why do you need the extended warrant? Again in most cases you don't!!
3. Home Emergency call outs and boilers
The average annual costs of such a policy is about £200.00 covering emergencies such as burst pipes, and a policy covering your boiler ranges from £9 to £12 a month.
These policies usually have exclusions, i.e. if the boiler is not serviced annually, the policy claim would be void; if the boiler is over ten years old it will not be covered and in some cases, the policy does not cover the summer months. It has been found that payouts are capped.
It is worth checking your home insurance policy as some cover these sorts of events. So again, in the majority of cases these policies simply are not worth it!
These sorts of policies are being offered to repair or replace your gadget if it is stolen or damaged accidentally.
The same cover can be obtained from your home insurance policy as a “personal possession” and you will usually get a better deal.
5. Card protection and identity theft:
Many people who sign up for a new credit card without even realising that the protection was there and they were paying for it. Similarly, ID theft cover is a monthly sum to cover you for payments or fraudulent transactions made in your name.
If you are the victim of such a theft, the banking rules will protect you. The UK Payments website which is the industry’s own trade body, says “The most you will ever have to pay if you are the innocent victim of card fraud is £50.00. In practice, most banks refunded you with the full amount. Not only will you be reimbursed but your credit record will be cleared, too” So do you need this insurance - In most cases of course not, but your bank will love you for taking it out!!