Five insurance rip-offs to steer well clear of

Published by Rebecca Rutt on 30 June 2011.
Last updated on 11 April 2013

Insurance form

1: Standalone mobile phone insurance

Losing your phone is annoying and can cost a lot of money to replace. To safeguard against this many people buy mobile phone insurance at a typical cost of around £7 a month. But this tends to pay out only if your phone is stolen or damaged.

Many policies are also riddled with exclusions, and often have an excess attached to them (typically between £10 and £30). A new iPhone 4 will set you back £500, so the excess in that case is only a small fraction of the cost of the handset.

However, if you have a standard phone, typically costing under £50 to replace, it is not worth paying for insurance: seven months' premium would cover the cost of a new one anyway.

Instead consider adding an 'all risks' option to your home contents insurance. This costs around £30 a year and will cover your valuables, including mobile phones, away from home.

Beware mobile phone insurance scams

2: ID theft cover

This type of insurance, costing between £5 and £7 a month, promises to cover you if your identity is stolen; but you already have the same amount of protection under the Banking Code. This stipulates that if the identity theft is not your fault, you'll get the money back from your provider.

ID theft cover often also offers you access to your credit report, but this is available through a credit reference agency such as Experian for just £2.

Have you been mis-sold ID theft insurance

3: Payment protection insurance

The banks have been slammed for mis-selling PPI policies and many are now set to pay compensation to customers - a clear warning sign that this product might not be worth having.

While PPI sounds good in principle - it's sold alongside mortgages, credit cards and loans to cover repayments if you're unable to work because of accident or illness - it's expensive and comes with a lot of exclusions. Its big sister, income protection insurance, offers much more comprehensive cover and can be cheaper.

How to reclaim your PPI premiums

4: Travel insurance at the point of sale

Once you've booked flights, most airlines will try to sell you travel insurance. However, in most cases this will be cost more than it will be elsewhere, and the amount of cover, in particular the value of medical protection, won't be sufficient.

Instead use comparison sites to find cheaper, more comprehensive cover.

Read: 10 tips when buying travel insurance

5: Buildings insurance from mortgage providers

When you apply for a mortgage, the provider will most likely try to sell you buildings insurance. This covers the structure of your home and is compulsory for all homeowners.

But go through an insurance provider instead to ensure you get cover that suits your needs at the right price.

More About

Leave a comment