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Why it could be too expensive to claim on your insurance

Felicity Hannah

Insurers have dramatically hiked the maximum amount they can set as an excess for their car insurance, raising the possibility that some customers risk being unable to pay and make a claim.

This new data comes at a time when many drivers may be feeling pretty good about the amount they pay. The price of car insurance did rise in the second quarter of this year but only by a small amount.

Data from the Association of British Insurers shows the cost of the average motor insurance policy in the UK rose to £467.

A rise sounds like bad news but it was an increase of just £1 compared to the previous three months. Average premiums were still £10 cheaper than the same time last year.

So it sounds like car insurance customers are doing okay. But the truth is that some of us may end up paying far more if they ever need to claim.

A little excessive

New analysis from GoCompare shows there has been a dramatic increase in compulsory excesses. That’s the amount the driver agrees to pay before the insurer steps in to pay any claim.

The level of compulsory excesses has rocketed – from between £50 and £475 in 2012, to between £50 to £3,000 in 2019. And £3,000 is a pretty substantial sum to cough up before being able to actually claim an insurance payout after an incident.

Lee Griffin, CEO of the comparison website, says: “Policy excesses are a hidden cost for drivers and they have gone up significantly in recent years.

“There’s also a massive difference in the cost of excesses between insurers. So when arranging cover it is essential you compare excess levels rather than just focusing on premiums.”

It’s easy to focus on the price of insurance but what really matters is not the cheapest policy but finding the cheapest policy that’s right for you. And that means a policy with an excess that you can afford.

Of course, you may decide to increase the voluntary excess to your policy in order to bring down the overall cost. That’s a judgement only the motorist can make but if it isn’t affordable then the entire policy could be wasted.

“Some drivers agree to pay a higher amount towards the cost of a claim in return for a lower premium,” Griffin adds. “However, if these drivers make a claim, their voluntary excess is added to the insurer’s compulsory excess – which can add up to a considerable sum.”

Many drivers admitted they had not fully understood the cost of their policy; 13 per cent said it was more than they expected and well over half (62 per cent) said they would have to either raid their savings or borrow money to pay their excess and make a claim.

Perhaps most worryingly, 5 per cent said they simply couldn’t afford to pay their excess. Without paying the agreed excess, drivers who need to claim can’t. It risks rendering the entire policy worthless and that is an expensive mistake.

It’s also not the only way that drivers can unknowingly wreck their chances of making a claim. Here are a few more hazards to avoid:

Accidentally fronting

It’s fairly well known that bringing in an additional driver to a policy can bring the price down. But that does not mean it’s okay to lie and say a more experienced motorist is the main driver – that’s a type of fraud known as fronting.

What’s more, car insurance providers are pretty good at spotting it. Fronting can invalidate your insurance, leaving you unable to claim at all.

Yet recent research by Cifas, the fraud prevention service, showed that ‘fronting’ is considered “reasonable” by 39 per cent of people. It risks being an expensive mistake.

You mislead your insurer

The information you give your insurer has to be true. You can’t claim you keep the car off the road if you don’t have a drive or a garage. You can’t claim your vehicle hasn’t been modified if it looks like something from Pimp My Ride.

If you have said you only use your car for personal use when you’re actually driving it for business reasons then that risks leaving you unable to claim.

Not updating your insurer

Should your circumstances change during the policy you also need to let your insurer know, to make sure you are absolutely covered if you need to make a claim.

For example, if you get any new driving convictions, you have to let your insurer know and you may need to accept higher prices.

If you do not tell your insurer of any changes then you may find they consider you to have failed to meet your side of the agreement.

Not taking care of your car

Your fully comprehensive car insurance should protect you against theft, that’s pretty standard.

However, that cover may not be there if you are deemed to have taken unnecessary risks with your vehicle. Leaving it unlocked, for example, or leaving the keys in the engine while you go into a petrol station.

One of the biggest risks for drivers rises in winter when many leave their car engines running while the windows defrost – a lot of policies will consider that to be reckless and refuse to pay out.

All car insurance policies differ so you should read the documents and check that you’re not accidentally driving without the protection you’re paying for.