Doubling up policies may raise premiums

Bank customers who claim on insurance provided within packaged current accounts could end up losing their no-claims bonus on other policies.

Most paid-for bank accounts now offer consumers some form of home, travel or motor insurance as an add-on in return for the monthly fee charged for the account.

But for many customers, this insurance is useless. Often consumers have already taken out alternative, and more suitable, policies. This means they are needlessly doubling up their insurance, paying twice for inferior cover.

Not only are consumers paying for insurance they already have, but they could adversely impact both policies if they make a claim on one.

The reason for the cross-over is a common insurance procedure known as a “contribution clause”. This allows an insurance company to claim money from a second insurance company if a customer has policies with both and has made a claim on one. The customer will receive a payout from the first provider they contacted, but as both providers have paid money, both will revoke the no-claims bonus that might apply.

For example, if a customer makes a claim for a stolen bag on the contents insurance policy provided within a packaged bank account, the bank account insurer may contact the customer’s home insurance provider and claim a contribution towards the cost of the payout. The customer will receive just one pay-off from the bank account insurance provider but will lose a no-claims bonus from both providers.

Peter Staddon, head of technical at the British Insurance Brokers Association, says customers may not even be aware that one insurer had claimed money from another until it came time to renew the policy.

“Look out for this term contribution clause in the policy details,” he says. “And make sure you make a claim against the most relevant insurance policy if you need to claim.”

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