Insurance. Are you paying for the same thing twice?


Insurance: Insurance paying

Has it ever crossed your mind to sit down and calculate how much you spend on insurance every year? If you do the sum, you will be surprised at how much you fork out for all the different types of cover. You'll also, in all probability, find that you are paying for some types of cover more than once - and every element will be adding up to cost you more than you need to pay each year.

Typical areas which end up being duplicated are theft, loss of income, legal expenses and death. It commonly occurs because people often don't have a full understanding of what their cover involves, especially if it has been arranged through a third party, such as a broker or adviser.

The Financial Services Authority (FSA) recently published results from a survey which showed that add-ons like breakdown recovery and legal expense cover are commonly attached to car insurance premiums, unless the customer says otherwise. Payment protection cover often overlaps with permanent medical insurance, meaning that people take out extra cover for loans and mortgages etc, without realising that the permanent medical insurance policy has got it all covered. For these people, they don't need to bother making any provisions for payment protection, it's just a waste of money.

The Financial Ombudsman has offered the following supplement to this issue: People?often do not realise until they make a claim that they have been paying for a policy that provides very little, if any, benefit?

It would seem that many people do not even understand what they are actually covered for. The case of Amanda Lariviere from West Yorkshire is the perfect example. Amanda was diagnosed with ovarian cancer and her reaction to the chemotherapy meant she was unable to go back to work. She received a tax bill at the end of the year, and to raise the money to pay the bill, she went into her mortgage provider to arrange a re-mortgage to free up the cash. Luckily, the financial adviser at her building society asked her to bring her life insurance details with her, and discovered that the policies were not covering life at all, but critical illness. Amanda had been paying - 0 a month for these Norwich Union and Scottish Provident critical illness policies, without really understanding what they were!

As a survivor of a critical illness, Amanda was able to claim on both policies and received a payout of - 00,000, which covered the tax bill and most of her mortgage!

If you have any of these policies, then it's well worth looking into the extent of your cover to check there's no duplication:

Critical Illness insurance can be bought on its own or an extra with life insurance. However, you may already be covered by your employer, so ask them before you go and buy this form of cover.

Life Insurance is often included on company pension schemes. It will come under the title of death-in-service benefit and if you were to die while in their employment, they would pay out a tax free lump sum which usually amounts to three or four times your final annual salary. This may mean you don't need to get an extra policy.

Permanent Medical Insurance (PMI) and Payment Protection Insurance (PPI) are similar in the sense that they pay out a monthly income if you're unable to work because of illness or an accident. If you have PMI, then you don't need to get any extra PPI with your car insurance, loan or credit card, because you're already covered. Most PPI policies only carry on paying for a year, PMI will continue indefinitely, or until the insured period comes to an end. The problem is that most PPI is latched onto the financial product that you are buying, and you don't really notice the extra amount because it's so small. The point of this article is that it all adds up, so try to avoid paying extra on these PPI policies if you've already got PMI.

Mobile phone insurance is a form of insurance that isn't worth the paper it's written on. You will probably have to pay an excess of - 0 on any claim, so you'd be better off by switching to pay-as-you-go and not taking out the insurance.

Legal expense insurance crops up on home and contents insurance policies as well as car insurance. It means that if there is a dispute on liability for the damages, then all the court costs will be covered. It's not compulsory that you get it, so it may or may not be included as standard in your policy. If you are a member of a trade union or a professional association, you may already be covered by the services they offer to their members - so be sure to find out before you add legal cover on.

ID Theft insurance is not something you may necessarily think about getting. However, it does exist and it is a common occurrence that can cause a lot of stress and inconvenience if you are the victim. However, if you are a victim then you will only have to pay the first - 0 stolen, according to Which??magazine, so it's not really worth insuring for. Your bank may not even expect you to pay the first - 0.

Credit card purchases are covered for a certain amount of time, often up to 60 days, so new purchases are already covered. With Barclaycard for example, a purchase costing between - 0 and - ,000 will be covered for theft and accidental damage for the next 60 days.

Michael is the expert financial editor for Scrouge Online ( www.scrouge-online.co.uk ) who specialise in Life Insurance and Home Insurance ( www.scrouge-online.co.uk/home-insurance.htm )
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