NFU Mutual study finds 82% of building and content policies charge additional fees
New research has revealed that more than 80% of home and contents insurance policies have hidden charges that could result in customers paying hundreds of pounds more than expected. According to insurer NFU Mutual, 82% of these policies have additional charges hidden in the fine print for holders who are not wiser until they are hit with a charge.
The insurer – which does not charge additional fees to its customers – examined data from 351 home insurance policies and 320 buildings insurance policies from Defaqto financial information, mirror reports. Research found that the cost of setting up a policy, as 25% of buildings insurance policies do, costs the customer an average of £28. Around 32% charge renewal fees for existing customers, at an average cost of £30.
In terms of contents insurance, 28% of policies charge an installation fee, while almost a third (31%) charge a renewal fee – at an average cost of £27 and £30 respectively. If a customer sets up a policy which is renewed after one year, they are looking at a potential additional cost of almost £60 before additional charges are imposed. What they end up paying depends on what’s hiding in the fine print of their policy.
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Other potentially chargeable extras include settlement costs, which are included in a third (33%) of buildings insurance policies and 31% of those covering contents. The typical charge incurred in both cases is £18. Cancellation charges of around £30 are leveled across almost half – 48% – of both policy types, while 75% of insurers across all tiers charge more to customers who choose to pay by direct debit.
This is a relatively new phenomenon, says James Daley of Fairer Finance: “These charges have not always been a major part of home insurance – unlike car insurance – but in recent years we have started to see more and more big home insurers introducing them.”
Fairr Finance research shows that 59% of home insurers still do not charge cancellation fees and 79% do not charge for policy changes. Those who charge a fee must do so at a rate that “does not exceed an amount commensurate with the service provided”, according to guidelines from the Financial Conduct Authority (FCA).
But with the practice perfectly legal, the only way policyholders can protect themselves against unexpected costs is to read the fine print and plan ahead. Otherwise, as this research shows, customers can be seriously stung.