Flood damage, return flights and windscreen chips: the little-known insurance gaps you're not covered for

Insurance customers are unknowingly buying home, travel and car policies that won’t fully cover them when they need to claim.

Price comparison websites have triggered a race to the bottom, leading insurers to limit what their cover will pay out for in order to offer cheaper policies. 

In the Nineties, water damage – caused by a burst pipe in a wall, for example – was covered as standard by home insurance. This is no longer the case as these claims are very expensive, costing insurers £1.8m a day, according to the Association of British Insurers, a trade body.

Few insurers today will pay out without charging an excess of £250 or more. A fifth of insurers, including John Lewis and Lloyds Bank, charge £350. 

A report from the British Insurance Brokers’ Association said price comparison services were behind the decline in cover. “The pricing power of the insurer has been weakened, policies offer less cover and there is a dangerous tendency to buy the cheapest,” it said. “This has led to a hollowing out of insurance policies.”

In car insurance, four out of five policies will not pay for replacement locks if keys are stolen. Damage to windscreens is often not covered without an additional charge, nor are stolen or damaged safety seats for children, which can cost more than £250.

James Daley of Fairer Finance, the consumer champion, said: “There is a widening gap between what firms are offering and what customers think they’re buying. Insurers don’t want to tell you about it, because they want you to think the policy will cover you for everything you could think of.”

Last week Telegraph Money reported that drivers could face huge legal bills from April when they seek crash compensation, which many insurers do not include in their policies, because of a change in the court system. 

Travel insurers also sell policies that leave customers unprotected, such as refusing to pay for return flights if a holiday is cancelled. Others will not cover the full cost of bringing a person’s body home if they die abroad, leaving friends or family to pay the rest. Repatriation can cost £3,000, of which many policies will pay only half. 

Fiona Macrae of Travel Insurance Explained, an insurance specialist, said: “Many consumers buy on price alone – that is their guiding light – and so many are let down at claims stage.”

Customers should be wary of buying on the basis on price and check that the insurance policy covers what they think they will need.