Will your home insurance pay out? One in five claims go unpaid
At least 350,000 people had a home insurance claim rejected between 2013 and 2014, according to new data released by the Association of British Insurers (ABI) for the first time.
Claims against wear and tear were the most commonly rejected, as these aren’t covered by home insurance policies.
Other policyholders were let down because they hadn’t “bought the right cover”, says the ABI. For example, they weren’t insured for events such as accidental damage, which isn’t covered by most home insurance policies as standard. Some also had claims turned down as the value of the claim was less than the excess – which is the fee insurers take from your payout.
However, 79% of home insurance claims were successfully paid during 2013 and 2014. And for those who did make a successful claim, the average pay out was £2,520 - around nine times higher than the average buildings and contents policy at £290/year.
Read some real stories about making home insurance claims from readers of Moneywise here.
What about travel and car insurance claims?
The ABI’s analysis of insurance claims also shows that 13% of travel insurance claims went unpaid, mainly due to cancellations not covered by policies, people not disclosing pre-existing medical conditions, customers being unable to prove lost items, and small value claims of below the excess.
The average payout for a successful travel insurance claim was £889.
Car insurance holders were less likely to be let down by their insurer, with 99% of claims being paid. The average value of a claim was £2,160 and one-in-ten policyholders made a claim in the last two years.
‘Buying insurance should be about ensuring you have the right product’
Huw Evans, director general at the ABI says: “As insurers, we want our customers to have greater trust in us to pay claims when life gets difficult. We cannot earn that trust without being more transparent about how many claims are paid and why a minority of claims are usually declined. That is why the figures we are publishing today are so important.”
Mr Evans adds: “Contrary to popular belief, insurers want to pay honest claims. It helps nobody when customers have bought the wrong product or have not disclosed important information.
“Buying insurance should never just be about getting the cheapest price in the quickest time possible, it should be about ensuring you have the right product for your hour of need.”
Unhappy with your provider? Complain
If you’re unhappy with an insurer’s decision, the first step is to challenge it directly. It then has an eight-week window to respond, after which point you can ask the Financial Ombudsman Service for help.
The Ombudsman today says it’s received over 4,000 complaints around home insurance already this year. In the last three months of 2015, complaints were upheld in the consumer’s favour in 33% of cases about contents insurance and in 40% of cases on buildings insurance.
Read the 'Moneywise 10 step guide to complaining' here.
If you’ve have a complaint about a financial service product you have bought but the company you bought it from refuses to resolve your problem after eight weeks, the Ombudsman can help. The Ombudsman will investigate and resolve the matter. The Ombudsman is independent and its service is free to consumers. The Ombudsman may find in the company’s favour but consumers don’t have accept its decision and are always free to go to court instead. But if they do accept an Ombudsman’s decision, it is binding both on them and on the business.
This is more usually a feature of car insurance but it can also crop up in contents, mobile phone and pet insurance policies. An excess is the amount of money you have to pay before the insurance company starts paying out. The excess makes up the first part of a claim, so if your excess is £100 and your claim is for £500, you would pay the first £100 and the insurer the remaining £400. Many online insures let you set your own excess, but the lower the excess, the more expensive the premium will be.
This type of insurance covers the structure and fabric of your property – the bricks and mortar, not the contents (for which you need contents or home insurance). If you have a mortgage, the lender will insist you have a suitable buildings insurance policy in place. Many lenders offer their own building insurance policies, but you don’t have to buy it from your own lender but you have the option of shopping around. The insurance covers you for the rebuilding costs, not the market value of the property.
Association of British Insurers
Established in 1985, the ABI is the trade body for UK insurance companies. It has more than 400 member companies that provide around 90% of domestic insurance services sold in the UK. The ABI speaks out on issues of common interest and acts as an advocate for high standards of customer service in the insurance industry. The ABI is funded by the subscriptions of member companies.
Does exactly what it says on the tin: covers the contents of your home for theft and damage and also may insure certain possessions (jewellery, cycles) outside of the home. Things to watch for include the excess and also the maximum payout on individual items. Another grey area is kitchen fittings, as some contents policies say these are not contents but part of the fabric of the property and covered by buildings insurance and some buildings policies don’t cover them because they regard them as contents.