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Insurance ‘contribution clauses’ could cost consumers a packet if they’ve doubled up on cover

17 March 2014

Gocompare.com is warning people to check what insurance cover they already have in place through their bank accounts and home insurance policies, or risk paying dear if they need to make a claim.

Some value added, or ‘packaged’, bank accounts come with travel, mobile phone and, breakdown insurance included, and some home insurance policies also cover possessions away from home – but if someone has one of these insurance policies separately, from another provider, and they make a claim, they could end up paying a lot more for their next policy.

Most insurance policies have ‘contribution clauses’ which state that if cover is provided by another insurance policy and a claim is made, the respective insurer would only pay their share of the claim.

If a customer made a claim, the insurer may ask whether there are any other policies that could cover the incident, if there are, the insurer could ask the other insurance company to make a ‘contribution’ – the insurance companies would then calculate a proportionate amount of excess for both policies, as stated under both insurer’s terms and conditions.

This also means that the customer would be making two claims, which would have to be declared when shopping around or renewing the following year, and could see your insurance cost increase.

When it comes to compensation claims, such as death or personal accident, every insurance policy the customer has would pay out the cover amount in full.

“It is essential that you know what insurance you have in place and whether you need additional cover. If you are heading off on a skiing trip, then you might not have enough cover from your bank account’s travel insurance policy and if you are planning a long term break – again there might be limits on the amount of time you can be away.”

Caroline added: “The important thing with insurance is to check everything –what you are covered for, whether you have enough cover, what the excesses are, whether the country you are travelling to is included, and what the insurer’s contribution clause is and how you would be affected should the worst happen.

“You would think that having more insurance is better, but that’s not necessarily the case. Over-insuring could result in you paying more at renewal should you make a claim.”