Clause for concern

7th March 2008 at 00:00
Insured up to the hilt for any eventuality, but are all those policies really worth paying for? Check the small print, advises Alison Brace

Insuring ourselves against some of life's uncertainties is a necessity. If your roof falls in, your buildings insurance will help piece together your home and if your luggage gets lost on holiday you will be relieved you had travel insurance.

But if you carry out a detailed audit of your other insurance commitments you may just find that you are paying out on policies that could be a waste of money.

When was the last time you took out Payment Protection Insurance (PPI)? Maybe you signed up for a store card recently and found yourself signing up to a PPI agreement at the same time. Scarily, you might not even have noticed.

About seven million PPI policies are sold each year to protect payments on loans, mortgages and credit cards if you are unable to work due to accident, sickness or if you lose your job. According to Datamonitor, the business analysts, it is a market worth pound;5.4 billion a year to the banks.

The Office of Fair Trading found that nearly a third of consumers assumed or were told that taking out PPI would help their application - and 87 per cent of loan providers automatically included PPI in the quote. The good news is that the Financial Services Authority has begun cracking down on misselling of PPI policies and fined a number of providers.

Remember that most PPI policies are optional - and always check the small print. For instance, if you are a supply teacher and technically self-employed, you may not be covered by a PPI policy. (See the FSA's jargon-busting website for point-by-point advice on buying PPI -

Have a look at your mobile phone bill. Did you sign up for insurance to cover a lost or stolen handset without checking your home insurance package first? If it isn't already included, you could add your mobile phone to your home contents policy and save yourself between pound;25 and pound;100 a year, according to If you're abroad, your travel insurance may provide cover.

Premium bank accounts sometimes offer mobile phone cover and travel insurance as part of their package. So make sure you don't double up on insurance.

But as high street banks raise the monthly charges of their top-of-the-range accounts, work out carefully which option is cheapest.

Another peace-of-mind ploy by retailers is the extended warranty. These pay for repairs or replacement of an item after the manufacturer's guarantee runs out. But sometimes the warranty itself can cost more than half the original price of the item.

Take washing machines, for instance. Which?, the consumer champion, found that four out of five washing machines did not break down in the first six years. And those that did were likely to break down in the first year - the period you are covered by the manufacturer's guarantee.

Some extended warranties offer a cashback option with a full refund of all your premiums if you don't claim on the policy for a fixed period. A great idea - but Which? warns that there are often conditions to getting the money back.

If you take out one of these warranties, check whether you have to register your cashback status to qualify - some companies only give you a very short time to do this. Miss the deadline and you miss getting the cash back.

And finally, has your bank or credit card company tried to sell you protection against identity theft? Which? has called this the "most useless financial product" and suggests you would be better off buying a shredder.

Remember, you can check your own credit file and any unusual activity with credit reference agencies such as Experian, Call-Credit and Equifax.

Insurance certainly has its place but make sure you know what you're really buying and don't fall for every hard sell on the high street. You could end up wasting a lot of your money.

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