Insurance tips and myths

The Association of British Insurers has published a list of five tips to get a better deal on insurance, plus five incorrect myths. Here's our take on the list.

Insurance Tips:

1. "Disclosure is key." This means that you need to tell your insurer everything you think might be relevant. If you're not sure, play it safe and tell them anyway. Remember that if you miss out something important, the insurer has the right to refuse a payout and cancel your insurance without refunding your premium, and could even take legal action against you.
2. "Your home should be insured for its rebuilding cost, not its market value." This is actually a money saving tip because the land makes up a large proportion of your property's value (as much as a third in some cases), but even if your house is completely destroyed you will usually still have the land.
3. "Home improvements should be reflected in the sum insured." A simple tip: if you've added a new bathroom or kitchen, the amount of cover you had in previous years may no longer be enough.
4. "Update contents cover." As you go along in life, particularly when settled into a new home, you accumulate more expensive possessions, so make sure you have them included in your total cover and individually detailed if they are expensive. If you buy an expensive item such as a new TV, it may be worth adding it to your insurance immediately.
5. "Life insurance is based on your health when you take the policy out, not on any subsequent changes." Unlike most insurance, you don't need to keep the insurer up to date each year. That isn't an excuse to take up bad habits though!

Insurance Myths

1. "Your vehicle is worth what you paid for it, not what it costs to replace." In fact, insurers will almost always pay out the replacement cost, which means that if you bought a shiny new model back in the day and it's now an old banger, you aren't going to get the full retail price.
2. "If your house suffers subsidence it will become uninsurable." Many policies will cover subsidence up to and including the first claim you make. You may struggle to get a renewal after that, but some insurers offer specific policies for houses that have suffered subsidence.
3. "The European Health Insurance Card (EHIC) is a substitute for travel insurance." The EHIC scheme only gets you the basic level of coverage available from the government in the country you visit, which may be less than you would get from the NHS. Another drawback is that it doesn't cover the cost of getting you back to the UK in an emergency, which can be extremely expensive.
4. "Online insurance comparisons always return the best insurance option." This depends very much on your circumstances. If you have fairly standard needs and check the fine print carefully, comparison sites can save a lot of time and money. But if you have specialized requirements, it may be better to look for specialist insurers.
5. "There is an ‘Act of God’ exclusion in insurance policies." The phrase "Act of God" is usually taken to mean that nobody is to blame. With insurance, this doesn't matter: policies have a stated list of what events are covered and what the exclusions are. Indeed, some of the most commonly insured events such as accidental fire or natural disaster could be called an "Act of God" but are still covered.