Using price comparison sites to buy household insurance
How can you get the best deal if you’re using a comparison site to buy insurance?

Millions of us use price comparison sites to compare insurance policies before we buy. It’s made comparing insurance much quicker and can save you money, but there is a danger that you may end up with the wrong insurance policy or with one that doesn’t do what you expected it to. I’ve bought my household insurance through a price comparison site and by using a broker (currently, it’s been arranged by a broker). Here’s what you should bear in mind.

Update 16th July
The financial regulator, the FCA, has said that price comparison sites were failing - because they didn't meet consumers' expectations and - in some cases - the FCA rules. It said that people buy products on price and don't always know how much cover they are getting (because the price comparison websites don't make this clear). Some people believed that price comparison sites were acting like online brokers, and finding the best policy for them and quoting a price, whereas the sites have no idea whether or not the policies they're quoting details of are any good for you.

End of update

How they are paid
Price comparison sites are paid a fee if you buy a product through them.

• It’s in their interest that we switch to a new company every year. If you happily stayed with the same company year after year and renewed directly, they wouldn’t make any money.

• Some are owned by insurance companies. For example, is owned by Admiral (which owns esure, elephant and Diamond). Gocompare is 50% owned by esure and Compare the market is owned by the Budget Group.

SAVVY TIP: The ones that are owned by insurance companies say they don’t favour policies from the companies that own them.

Comparing policies online
I compared household insurance at Moneysupermarket and GoCompare. Both came up with a range of policies from cheap to more expensive than I'm currently paying: However:

• In all cases, the cheapest policies had quite high excess levels (much higher than the excess levels I’d typed in when I filled in the forms online).

• Some of the company names were unfamiliar. Without doing a bit of your own research about them, you may not know who’s behind them.

• Policy documents are often 20 pages, while one I skim read was 40 pages. So, unless you’re prepared to check the details of these, you still won’t actually know what cover you’re getting.

What to look for
Saving money on your insurance is well worth doing. And I’d definitely recommend shopping around if you’ve never switched insurance as you’ll be able to make some real savings. However:

• When comparing policies online, be aware that the comparison site may well increase the excess. When I looked I said I wanted an excess of £100, but most policies carry a compulsory excess, so the excess levels could be up to £250 each on contents and buildings.

• You don’t want the cheapest policy – you want the one giving you the best value. The cheapest policies may not have the cover you need.

• Check the levels of cover for something called ‘trace and access’. This pays out for the cost of – for example –finding the source of leaking pipes in your kitchen and not just the cost of the damage. If, for example, you have to dig up your kitchen floor or rip out your units, that could cost a lot. You need at least £5,000 cover, preferably more.

• Also check how much cover you have for alternative accommodation. If you have to move out of your home, it’s normally because a disaster has happened – it’s been flooded or damaged by fire. That can take many months to repair. Some policies have low limits (may be as low as £15,000 – certainly several have £25,000). If you’re out of your home for nine months, that won’t go very far.

• Check the excess levels for water damage/burst pipe – some have a much higher excess.

• Lastly, check how the policy pays out. Some policies give you the choice of a replacement, cash or vouchers to spend online or on the high street. Some will offer vouchers as a default option and you have to fight to get cash or a replacement if you have – for example – valuable jewellery.

• Do a keyword search of the policy document PDF if there are particular parts of the policy you want to check. I always do this for ‘alternative accommodation’ limits, trace and access and exclusions.

Related articles:

How to get the right contents insurance

Can your insurer pay for replacements with a voucher?

Five myths and facts about getting flood insurance

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Posted by JaneL dated 2013-06-16 19:27:17
What about mortgage brokers? I'm getting on a bit. I worked in the insurance industry forty years ago. I've used mortgage brokers for all my insurance needs for many years. Nowadays, when I need insurance I do check what I can get on the internet, then I ring or email a broker. So far the broker has always given me the better deal. The most recent example was just a couple of weeks ago: I'm buying a retirement home in Devon which will be empty for a year while I am still living abroad. The broker quote was nearly half the lowest quote I could find on the internet. Even if the internet quote was the best deal, I'm always suspicious of insurance special offers for new customers. In my experience the premium is often only low for the first year and then hiked up in the second.
Posted by Sarah Pennells dated 2013-06-17 11:04:02
Hi JaneL, Thanks for your comment. You make a good point. I think there's an assumption that you can always get a cheaper - comparable - deal on the internet, but I've not found that's always the case. I've bought insurance through price comparison sites and via a broker and I think you can get a really good value policy (maybe not the very cheapest) through a broker. What I like is the fact that a good one will also help 'fight your corner' if you have to make a claim.
Posted by Tom Conner dated 2014-07-18 12:58:05
It's also worth knowing that many insurers actually create specific policies just for comparison sites where they strip out cover to make it cheaper. In the life insurance space policies were created where the premiums go up with age so they look cheaper. A lot of people probably weren't aware of this. It's also worth noting that many brokers will offer the same premium as comparison sites (ours does for life cover) but the brokers also provide financial advice to ensure it is the right policy. Therefore many people are essentially doing themselves out of free advice by going through a comparison site.
Posted by Sarah Pennells dated 2014-07-22 15:36:29
Hi Tom,
Thanks for the comment. It's a good point you make. I've had tailor-made insurance policies via a broker before. I didn't know about the life insurance pricing issue, but I do know that buying life insurance is not as simple as choosing the cheapest one...
Posted by Howie dated 2014-07-23 06:15:52
Comparison sites are bias ,they do not have all insurance companies on they lists.if you have an insurance broker in your town go and see them you will be surprised what they can offer.its a no brainer .i am not an insurance broker
Posted by Sarah Pennells dated 2014-07-27 10:12:09
Hi Howie,
Thanks for your comment. I think the comparison sites would say that they are not biased, but personally, I'd rather not use one for a complicated product such as insurance. I have used them in the past but frankly, I don't have the time to read 5 or 6 policy documents (20-40 pages each), which I would have to do to make an informed choice.

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You should always obtain independent financial advice.