We all have home insurance in place because we want to be prepared for the unexpected. If we’re faced with unforeseen costs, we want our policy to be there to fall back on – right? Of course, your insurance cover is absolutely designed to help you meet costs if the worst happens – but it could be wise to weigh up whether it’s really worth making a claim in every instance? The answer is probably no.
Firstly, consider your excess. If you have a small claim (for a gadget or your if watch got damaged or stolen) would it be worth paying the excess attached to the policy? For example, if your watch was worth £150 and you had to pay the first £100 of a claim – it may not be worth it for £50. You could be better off replacing the watch out of your own pocket.
The effect on your no claims discount
Equally, it’s worth thinking about how a claim will affect your premiums. Most insurers will charge you more for your policy on renewal if you have made a claim in the past. Making a claim could have a significant impact on cost, and insurers will want to know your recent claims history before offering you a policy.
Understandably, this may seem unfair. After all, you’ve paid for the cover so you’re protected – why should you be penalised if you decide to actually use it! It’s all about how the insurers balance risk and also mitigate fraudulent claims. The more claims an individual makes – the more risky they appear to be in the eyes of the insurer, even if these claims are due to genuine misfortune. Balancing risk is the only way that insurers can continue to offer insurance. If your home is broken into, an insurer will probably assume there’s a risk this could happen again. If numerous items get damaged, it could well be likely that something will get broken again in future and you’ll submit another claim.
How much a claim affects your premiums may be dependent on a number of factors – what type of claim it was, how much it was for, your other risk factors etc…But be aware that it could significantly push up prices. With some car insurers, just making one claim could see an annual premium jump up by almost 50%. Similarly, with home cover, just one accidental damage claim could see pounds piled on to your existing policy.
Nobody is suggesting that you should never claim. An insurance policy should be there for the situations you really couldn’t manage to pay for yourself if things went wrong. If your house was extensively damaged by fire, your car was stolen or a high-value item was badly damaged – you could be left completely helpless financially without the assistance of your insurance pay-out. However, it’s wise to carefully weigh up the pros and cons of making a smaller claim to ensure it doesn’t end up costing you much more in the long-run.
We carefully select the insurers on our panel for their cover levels, price and claims service; to make sure you get the best possible quality for less. What you see is what you get – no hidden excesses or excessive fees. For more information, you can call our experts on 0330 0600 600 or visit www.policyexpert.co.uk/contact for more ways to reach us.
Published 3 February 2011