The ‘most forgotten’ insurance policies, with one only claimed on every 664 YEARS

Some types of insurance policies are claimed only once every 664 years, according to This is Money’s analysis of data from the financial watchdog.

The problem is with smaller insurance policies sold individually or as add-ons to things like auto or home insurance.

Many of these smaller policies are almost never claimed, suggesting that most consumers have no idea they even bought them.

Recent figures from the Financial Conduct Authority have highlighted the magnitude of the problem.

Smaller insurance policies are individually low in price, worth less than £50 a year each. But that quickly adds up.

The FCA’s data shows that the three types of insurance that are the least claimed are personal accident coverage, guaranteed asset protection (Gap), and pre-event legal fees coverage.

A fifth of Britons have at least one of these policies, and they collectively cost £146 million a year in premiums.

Most of this money is kept by insurers, as only a small amount is ever paid back in customer claims.

For example, figures from the FCA show that only 0.16 percent of personal accident coverage, which is sold as a supplement to auto insurance, is claimed each year.

That means that an individual person with this insurance would, on average, make a claim only once every 664 years.

An astonishing 3.4 million Britons have this insurance cover, worth £30.83 million a year – or £8.80 per policy on average.

Another example is additional Gap insurance (guaranteed asset protection). This coverage pays for the depreciation of your car as it is written off and is normally sold along with the motorcycle coverage.

But Gap insurance has a claim rate of just 0.30 percent per year — or a single customer making a claim every 333 years on average.

Nearly half a million (492,000) people have this cover and they pay £28.63 million for it, or about £58 a year.

The pre-event legal expenses insurance pays the lawyers’ fees for quarrels related to your property. It is purchased separately or as a supplement to home or car insurance.

The home insurance variant is generally claimed once every 312 years per policyholder. About 9.1 million Britons have one of these deals, and insurers charge £87 million a year for them – about £9.40 per year per person.

Those three insurance deals alone are bought by 13.1 million people in the UK each year, or one in five of the UK population.

Add-ons pay more… if customers remember them

But some smaller insurance deals are really useful when consumers actually claim because they almost always pay out.

Accident coverage, for example, pays out on 96.57 percent of claims filed. For Gap insurance this figure is 96.86 percent, but for pre-event legal costs it is lower, at 56 percent.

That claims acceptance rate is broadly comparable to auto insurance, true 5.11 percent of drivers claim each year and 99.18 percent of claims are paid.

For home insurance, approximately 2.63 percent of policyholders file a claim each year and 77.36 percent of claims are paid.

To be fair to the insurers selling smaller add-on deals, they’re designed for rare emergencies and aren’t meant to have huge claims – but it seems consumers have largely forgotten about them.

Michael Sicsic, managing partner of financial services consultancy Sicsic Advisory, said: ‘Most of these coverages are used for emergencies such as a home emergency or breakdown – so you would expect a low claim frequency and a good claims acceptance rate.’

However, the fact that insurers keep most of the premiums for the aforementioned policies for themselves and don’t pay them out in claims suggests that many consumers seem to forget they have the coverage – if they ever realized they already had it.

The level of premiums paid in claims can be as low as 0 percent for some smaller lines of insurance.

For context, about 40 percent of home insurance premiums are then paid out in claims, rising to 56.34 percent for auto insurance.

Sicsic added that customers are much more likely to claim a standalone insurance deal than an add-on.

He said: ‘That does suggest that some customers forget they have the coverage and forget to claim a valid insurance policy.

It is reasonable to assume that these products are inherently useful. It’s about whether customers understand them and whether they are reasonably priced.’

An FCA spokesperson said: ‘Companies need to ensure that their products provide fair value to consumers, taking into account the value measurement data.

Under FCA rules, companies must regularly review the insurance products they offer, assess whether products offer fair value and take appropriate action if they do not. If necessary, we will consider further measures to protect consumers.”