How to pick the best deal through comparison websites
Monday, August 6 2018
Most of us are now comfortable with the idea of using price comparison websites. It’s a quick and easy way to get a good deal, but just how much attention do we pay to what we are buying? In this article we’ve put together the essential information about comparison websites and how to use them.
Understanding price comparison websites
Like their name suggests, comparison websites will generally focus on showing you a list of results; cheapest to most expensive. It’s easy to be of the impression there’s not much difference between each option. In a recent CoverBuilder survey we found that 65%* of people believe the options shown are basically the same, and that some insurers are just cheaper than others. It’s unfortunate consumers are so used to the term ‘price comparison’ and its perceived meaning. There is so much more to finding the best deal than just comparing price.
Compare and save! But at what cost?
Everyone loves a deal but can something be too cheap? It’s important to start with an idea of why you want the cover in the first place. This will give you an idea of your appetite to taking a risk versus the budget you have.
“your appetite to taking a risk versus the budget you have to spend”
To get a great policy at the best price you need to think about the level of cover. Most policies will have a limit put in place for the total amount you can cover. Often used on home insurance policies is the benefit of unlimited cover. This means that they do not cap the buildings and/or contents value you wish to cover.
Unlimited cover might sound good, but there are drawbacks.
- Cost is one as this breed of policy certainly isn’t the cheapest.
- Restrictions and exclusions are another factor to take on board so it’s essential to read the fine print to check what responsibilities the policyholder has and what the insurer won’t cover.
- But perhaps most important of all is understanding that an insurer will only ever pay out the actual cost of rebuilding a property if it is a total loss or the actual value of an item if lost or stolen and no more.
Even if the limits aren’t capped, you will only ever receive enough money to indemnify you.
What does indemnity mean in insurance? In simple terms it is the process of returning you to the same financial and situational circumstances. After a claim you should be returned to the same position as you were pre-claim. You should not be at a loss or profit from the insurance company rectifying the issue. An example of this is when a car is written off. Your claim value is calculated on the market value of the car at the time of incident. If the car has devalued then you shouldn’t expect to the same money as if the car was new.
It’s easy to gaze at the stars
You might be tempted to go for insurance that has been given 5-stars from an independent rating agency like Defaqto. A top-rated policy may have all the bells and whistles and look the best option. The fact is it may not be any more suitable for you than a 3-star policy. One of the problems is that some elements of cover may be pretty useless on a day-to-day basis. If the insurer removes them then Defaqto is likely to reduce the star rating. The insurer will worry this could lead to reduced sales of this policy. Here’s a link to getting the most out of Defaqto.
It’s quick to find out how a company is doing by typing into a search engine their company name and reviews afterwards.
You can see in the image above that a simple search on CoverBuilder can provide a valuable insight into the brand. There are multiple places on the first page that provide further ways to check how good a company is.
Star and quality ratings such as Trustpilot, Feefo or Reviews.co.uk and other reviews websites such as Which? can be a valuable resource. You can also look at social media to what others are saying about your insurer shortlist.
Look a little deeper to see where the company is based and regulated
Comparison websites will show many insurers you recognise, but also many you won’t. Now that in itself isn’t necessarily a problem an many companies have numerous brand names. What could present an issue further down the line is where the insurers are geographically based (headquartered and regulated).
One thing that makes the UK insurance industry stand out is the gold-plated approach its regulators (FCA and PRA) have adopted. Insurers based outside the UK, for example in Gibraltar or Malta, may not have to follow such stringent rules. If they go bust, you may find yourself completely unprotected and having to buy insurance all over again.
An insurance policy excess is designed to help spread the risk of insurance between you and the insurer. The higher the amount you are willing to contribute to a claim, the more appealing to an insurance company; therefore, the premium generally tends to come down. This mechanism is sometimes used to show cheaper prices on comparison websites. There is nothing underhand about it so long as it is clear to you as to what the excess is. It is something to be aware of as it can impact you significantly. You need to consider how much you can afford to pay towards a claim, in the event of a loss.
Would you be able to get together a hundreds of pounds at short notice? Balancing a lower excess against the policy price may work better for you.
What is an excess? This is the amount you opt to pay towards the cost of a claim. An example would be if you have a £300 excess and a claim value of £1000. The claim would only cover the gap of £700 to indemnify you.
What happens when you click away from comparison websites?
Once you have made your choice from the list of results you’ll need to click to get the deal. Here is another step you need to be very careful about. You’ve answered a lot of questions and been provided with prices. Very often your premium is based on a number of assumptions. This is when companies assume answers to questions comparison websites don’t tend to ask.
“companies assume answers to questions comparison websites don’t tend to ask”
These assumptions will often be the most common answers people give but remember, that may not be suitable for you! You’ll be given an opportunity to check the assumptions the company has made about you to get a quote. We highly recommend you check these, as the onus is on you. The company has to make it easy for you to do this before you buy. Skipping this step could lead to difficulties down the line, particularly if you claim.
Look for sections labelled as ‘our assumptions about you’.
Hidden costs you can’t compare
The most obvious figure you’ll see in the results table is the price of the policy. Are there other costs to consider? Yes, definitely. Occasionally you may need to make change to your policy during the policy term. We naturally think this is and should be a simple thing to do that also shouldn’t cost you. This reality is often quite different. There are companies who offer a £0 charge or administration fee to update a policy, however; there are companies who can charge up to £75 for a simple change. Cancellation charges on a policy is also something to watch out for. Again, there are companies who will allow you to cancel at any time for free. Others can charge high cancellation fees and also a charge for a set amount of time on cover.
What if you don’t fit the norm?
There are a growing number of people who are now falling into a category called non-standard. Comparison websites generally ask the same set of questions to get you a list of results. The issue for non-standard people is the special circumstances that generally need to be conveyed to a potential insurer. Questions don’t tend to be asked to the depth necessary on a comparison website.
“Comparison websites generally ask the same set of questions”
This makes it difficult to get a reliable list of prices and options. As we have highlighted, insurers will often ask you to check their assumptions about you in combination with answers. Non-standard customers will need to correct these assumptions to get a valid quote.
On occasion an insurer will then either increase the premium or withdraw their ability to cover you. This makes the whole job of finding cover far more long-winded.
Go bargain hunting
Whilst price comparison websites do this for you, don’t stop at just one. Not all insurance providers appear on every comparison website. There can also be different deals, rates and incentives meaning it’s best not to assume they are the same. The Competition and Markets Authority (CMA) recommend consumers use several sites to ensure they are covering all the bases.
“sponsored results show higher and not because they’re necessarily the best for you”
Some comparison websites allows paid for listings. Companies can bid for their listing to appear near or even at the top of the results list. Be wary of ‘sponsored’ results as they artificially show high up on the list. They may not necessarily be the best for you.
Here’s our 10 tips to pick the best deal from comparison websites
- Understand your appetite for risk? Do you want a policy that covers the basics or do you want a more comprehensive policy?
- Not every comparison website has the same list of insurers, so shop around.
- Check the price difference for paying in full compared to those via monthly instalments. You can often save heavily by paying in full.
- Check if the top results are there naturally, or are sponsored/paid by an insurer to show higher up the list.
- Check the cost of all the add-ons and paying monthly. Adding these up can push the price higher than the next in the list who includes these as standard.
- Be careful when you go from the comparison websites to the deal website. Check all the details transferred over correctly.
- Check the assumptions. A mistake here can lead to complications further down the road.
- Does the brand currently have any extra offers that can “sweeten the deal”?
- Do a search on the company’s name and the word “review”. Take a look at what reviews are out there.
- Check social media for any recent posts. You may see many happy customers or big problems with the services or products.
So how do you get that epic feeling about getting the best insurance deal? Take time to prepare what you actually want and always take a closer look.