Gadget insurance: consumers, do your research
Buyers can be confused over what policies cover, how long they last and when to update them
Insurance policies for gadets can save consumers money but can also be confusing. File photograph: Daniel Law/PA Wire
Gadget insurance would seem to make sense in a world where a smart phone costing €1,000 can be all too easily ripped from one’s hand by a canny criminal or smashed into pieces if dropped onto an unforgiving floor tile.
Compared to the potential losses, the pricing of many policies look attractive. Some premiums start at less than €10 a month, and salespeople - sometimes operating on hefty commissions - can make the proposition seem very attractive.
Anyone with such a policy who has ever fallen victim to crime connected to their device or lost their phone in a pub or seen it fall and smash on a hard floor and then gone on to make a successful claim will certainly sing its praises.
But for all those who have benefited from having gadget insurance, there are others who have paid premiums faithfully only to find out that when they need to make a claim - for whatever reason - the small print is working against them.
There are others who don’t understand or who were never told that some gadget insurance policies can run for as long as five years unless cancelled by the policy holder, and as a result continue to pay premiums for gadgets that they no longer have any use for.
There are more who only sign up for such products because of a hard sell and, in truth, have no idea what they are paying for. Such confusion is always going to work against the consumer.
Recent studies from the ESRI and its reviews of international literature suggest that when a financial product has too many features consumer frequently make the wrong decisions - and in many instances “too many” means more than two or three features.
The ERSI also highlights that consumers often agree to add-on insurance at the point of sale due to emotional and other factors that can prompt what is known as “decision fatigue” - which “limits a consumer’s ability to fully understand the terms and conditions, for example, if an excess applies, and the overall cost of the insurance,” the Central Bank says.
All too often when people make claims they find their cover is not as broad as they assumed because the list of exclusions can be long. Moreover, payouts can be denied with little or no room for appeal.
There is also a lack of awareness of what needs to be done ahead of making a claim, and this means many people who have legitimate claims lose out because they don’t take the right steps in the right time frame. Others are disappointed when they realise they are not automatically entitled to a new device if something happens to an existing one.
Sometimes excesses are so high as to make claims pointless, while people are frequently unaware they need to update their insurance every time they update their phone and that failure to do so could lead to a person paying a premium on the double.
That is not to say such insurance policies are worthless - far from it. They can save consumers a lot of financial heartache - and, at more than 90 per cent, the acceptance rate for claims is impressive.
But if this report tells us nothing else, it tells us that knowledge is power and consumers need to more to inform themselves as to what they are buying while those doing the selling need to do more to make the acquisition of that knowledge easier.