Can your insurer pay a claim with insurance vouchers or can you refuse?

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Over the last few years an increasing number of insurers have been paying claims with insurance vouchers, rather than cash or replacing items that have been damaged. Can your insurer pay a claim with vouchers or can you refuse and take the cash instead?

Can your insurer pay a claim with insurance vouchers?

When you make a claim on your insurance policy, especially for something like damage to contents, your insurer may settle your claim in one of several ways. Not all insurers offer all the options. You may be offered:

  • A cash payment that’s the same as the replacement value of the item(s).
  • A replacement which they will arrange (and deliver) for you.
  • An insurance voucher or debit card charged up to a certain value to be used at specified supplier.
  • A cash payment: equivalent to the cost that the insurer would have to pay their preferred supplier for a replacement.

SAVVY TIP: With the last option, the cash payment could be more than 30% less than the retail price of the item. That’s because insurers negotiate a bulk buy discount with their preferred suppliers.

Do I have to accept insurance vouchers?

If your insurer offers you a voucher or debit card, that doesn’t mean you have to take it. You can ask for a replacement or a cash payment instead. Some insurers are more flexible or generous than others.

  • Some insurers will let you – as the policyholder – decide whether you’d rather have cash or vouchers.. They will also give you the full value in cash if you’d rather buy from a retailer of your choice.
  • Some will offer you vouchers and will deduct the discount if you’d rather buy the item from a retailer of your choice.

SAVVY TIP: Whatever the insurer’s approach, it cannot give you the lower cash amount if you don’t accept the voucher, if you can’t buy a replacement item from the retailers on its preferred supplier list.  However, there are some grey areas. For example, you may not be entitled to insist on a particular brand of camera/laptop etc if there’s something else similar that has the same specification. But if there’s a difference in brand quality, you’d be entitled to argue that you’re not being offered a ‘like for like’ replacement.

Why do insurers pay claims with vouchers?

Insurers pay claims with vouchers in part because they can negotiate big discounts with their preferred retailers.  The size of the discount — and the number and range of suppliers they use – will depend on how much business the insurer can send the way of the retailer and on the retailer itself. The problem is that this information isn’t normally given out before you buy the policy. In fact, it’s not even in the small print of insurance policies.

  • If you’re buying your insurance policy through an insurance broker: they should know how different companies handle claims and how flexible they are.
  • If you’re buying the policy through a price comparison site: I’d recommend downloading the policy wording (it’s sometimes called the ‘policy document’ — don’t just click on the policy summary as it’s not the same) and doing a search on the PDF on the word ‘supplier’. It will normally take you to a section entitled something like ‘how we handle claims’ and it will give you an idea of their approach.

When you can complain about a voucher settlement

If your insurer won’t settle your claim in the way you think it should you can complain to the free financial complaints service, the Financial Ombudsman Service.

Cases are decided individually but, in general terms:

  • If you want to take the cash: If you simply prefer the cash because you’d like to buy the item at a later date or don’t want to replace it, the insurer is entitled to give you cash minus the discount it would have been given by its preferred supplier.
  • If you want to buy the item from your own choice of retailer: it would come down to whether or not you would be disadvantaged by being made to buy something from a preferred supplier.

Using the insurer’s preferred repair firm

There is one situation where it’s normally a better idea to use the insurer’s preferred supplier and that’s if you’re having any repair work carried out. Many insurers use companies from their own panel but also give policyholders the option of getting quotes from local firms.

  • If you use a firm contracted by the insurer direct: it’s the insurer’s responsibility to make sure the repair is carried out correctly. If you later realise the job hasn’t been done properly you can go back to the insurer and get them to sort it out.
  • If you use a firm you’ve chosen: you don’t generally have the same rights and you’d have to take it up with the builder/plumber etc if there was a problem further down the line.

Related articles:

Choosing the right contents insurance policy

Can a conviction invalidate your insurance cover?

Complaining to the Financial Ombudsman Service

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