Are Paid Auto Insurance Supplements Really Worth It? – Gareth Shaw
When shopping for auto insurance, it can be easy to get carried away by the peace of mind that the vast array of paid add-ons claim to offer. From legal protection insurance to the enhanced courtesy car to key protection, all of these will help soften the shock should something go wrong, but the costs can quickly increase.
The excess protection insurance is in this bucket of add-ons and I can see the appeal.
When you buy insurance, setting a higher deductible – which is your contribution to the cost of a loss – can lower your premiums because your insurer rewards you for committing to paying more for a loss.
The downside to using this tactic, however, is that a high excess can make claims for small repairs unprofitable and larger repairs unaffordable, especially if you have to make multiple claims in a year. This is where excessive protection can help. It reimburses some or all of the excess that you owe when you make an eligible claim. But beware, there can be tricky terms in policies that can undermine value.
Our research found, for example, that some policies will not pay for certain types of claims, such as windshield repairs.
You are also already paying for no-claims bonus protection. A No Claims Bonus is a discount applied to your auto insurance to reward you for not making a claim on your policy.
You could get 30% after a year without a claim, and that discount increases for each year without a claim. By the time you have five years of claims, you could qualify for a 60-80% discount.
It can be incredibly valuable, but discounts can be eroded by making claims. This may bring the discount back to what it was in previous years. But purchasing no-claim bonus protection can protect that discount if you need to make a claim.
This is another supplement that you can purchase with your insurance that will prevent a limited number of claims (two or three claims in a three year period is common) from impacting your bonus.
It usually costs around £ 60 per year, and the bigger your no-claims bonus, the more it’s worth paying for this coverage.
This doesn’t mean it will stop your premiums from increasing if you need to make a claim.
While you protect your rebate, the insurer may set a higher price for your policy in the future because they think you are riskier and more likely to make a claim in the future.
So while you may keep, say, a 60% discount on your policy, the amount to which that discount is applied may be higher.
It boils down to whether you think you can afford to pay the £ 650 deductible to make a claim.
Since you have accumulated several years of no-claim bonus, this suggests that you are less likely to make a claim and less likely to use the additional protection coverage.
And if you choose to pay for both supplemental coverage and claims protection, you’re adding £ 100 per year to your car insurance costs, when the greatest value is likely to come from claims protection.
Gareth Shaw is the Money Manager at which.co.uk.
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