When you’re shopping for car insurance, it can be easy to get swept up by the peace of mind that the vast array of paid-for add-ons purport to offer. From legal expenses insurance, enhanced courtesy car, key cover – these will all help soften the blow should something go wrong, but the costs can quickly mount up.
Excess protection insurance sits in this bucket of add-ons and I can see the appeal.
When you buy insurance, setting a higher excess – which is your contribution to the cost of a claim – can lower your premiums, as your insurer rewards you for committing to pay more towards a claim.
The downside of using this tactic, however, is that a high excess can make claiming for small repairs uneconomical and bigger repairs unaffordable, especially if you need to make multiple claims in a year. This is where excess protection can help. It refunds some or all the excess you must pay when you make a qualifying claim. But watch out, there can be tricky terms within the policies that can undermine the value.
Our research has found, for example, that some policies won’t pay out for certain types of claims, such as windscreen repairs.
You’re also already paying out for no-claims bonus protection. A no-claims bonus is a discount applied to your car insurance to reward you for not making a claim on your policy.
You might get 30 per cent after a year of no claims, and this discount increases for each year no claims are made. By the time you have five years’ worth of claims, you could benefit from a 60 per cent - 80 per cent discount.
This can be incredibly valuable, but the discounts can be eroded by making claims. This can bump the discount back down to what it had been in previous years. But buying no-claims bonus protection can protect this discount if you do need to make a claim.
It is another added extra that you can buy with your insurance and will prevent a limited number of claims (two or three claims over a three-year period is common) from having an impact on your no-claims bonus.
It typically costs around £60 a year, and the bigger your no claims bonus, the more worthwhile it is paying for this cover.
This doesn’t mean that it will stop your premiums rising if you need to make a claim.
While you are protecting your discount, the insurer may price your policy in the future at a higher level because it thinks you’re riskier and more likely to make a claim in the future.
So, while you may be able to retain, say, a 60 per cent discount on your policy, what that discount is applied to may be higher.
What this comes down to is really whether you think you can afford to pay the £650 excess to make a claim.
Given that you have built up multiple years of no-claims bonuses, that suggests you’re less likely to make a claim and less likely to use the excess protection cover.
And if you opt to pay for both the excess cover and the no-claims protection, you’re adding £100 a year to your car insurance costs, when the greatest value is likely to come from the no-claims protection.
Gareth Shaw is the head of money at which.co.uk.
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