Compare the Market? ~ What the comparison sites DON’T tell you…

Comparison websites certainly know how to advertise. They are constantly reminding us that we get a free Meerkat or that we’ll feel ‘epic’ for using them to save money on products such as insurance. And, I’m the first to admit they do have their place in the market. But as a professional, advising clients on mortgages and insurance, I feel there are few things that need to be known – that way one can make an educated decision on whether it is the right route to take.

This blog deals with the following:

  • Comparison sites may make multiple credit searches when you ask for a quote – what impact does that have on your credit rating?
  • Comparison sites generally make it confusing to understand what the actual insurance excess is – what is the difference between compulsory and voluntary excess?
  • Comparison sites rarely consider the things you value the most when providing initial quotes – how important are your most valuable things to you?
  • Comparison sites cannot give tailored advice

So why is this so important? When you are insuring your home, it is for most people, your most valuable asset and being under insured is a huge risk. Not only that, but using a comparison site can genuinely hamper you chances of getting a mortgage. To find out more, read on…

Let’s deal with the credit score issue first.

How can using a comparison site harm your credit rating?

If you use a comparison site to check out home insurance prices, certainly with Compare the Market, the data you enter is instantly sent to all of the insurance companies they use. This is done for two main reasons: 1) if you are under financial stress you are more likely to make a claim and 2) if you choose to pay monthly, the insurers often use a finance company to fund the policy and so the automatic systems they have will credit check you for that finance proposal.

What is the impact on your credit score? If you have, say 20 companies return a quote, there is every chance all 20 companies have run a credit check. The more credit checks you have the lower your score becomes. There is good reason for this, but that is for another article. The point is that multiple credit scores will lower a persons credit score. Although these searches to your credit rating will drop off your credit report after a period of time, the effect can be severe. Take for example if you are arranging a mortgage. When the lender undertakes a credit score after such a vast number of searches have taken place, they may refuse your application on the basis that your score is too low. And this could seriously hamper your plans.

What if you already have the mortgage in place? The reality is that you are still not clear of the problem. Even if you have a successful ‘decision in principle’ or ‘acceptance in principle’ from your lender, many high street lenders will carry out another credit check just before the mortgage offer is issued. This also applies if any material changes need to take place. For example, with many lenders, if you are applying for a remortgage and the lenders surveyor does not agree with your valuation and values the property at a lesser amount; the application will have another credit score – if your score has reduced, they may now decline the application altogether.

The answer, is that if you really want to compare the market with an online company, be sure to have your ‘ducks in a row’. My advice is don’t entertain doing this until you have a firm Mortgage Offer in your hand.

In general, these searches will drop off your credit profile over a period of time. So the damage is limited to months and not years. But it could still restrict you in other ways. Take for example if you wanted to apply for credit for a new car, furniture or other goods. So the message is think carefully before you give permission for one company to pass your details to others and run an unknown quantity of credit searches on you.

If you want to know my answer to the issue, it is further on in this blog, but in the meantime, the next point:

Comparison sites make it difficult to understand the excess

To be clear, there is a standard or compulsory access with every insurance product. This is the contribution you pay when you make a claim. There is also a voluntary excess, which you can choose to agree with the insurance provider. This voluntary excess is an extra amount on top of the compulsory excess. So if you choose a voluntary excess, you pay the total of both the compulsory and voluntary amounts. While comparison websites show in bold letters the voluntary excess, they are typically not so forth coming about the compulsory access and if you are not careful you could have a policy which has cheap monthly payments but an excess of £500 or even more for you to pay in the event of a claim.

While some may prefer a larger excess and smaller monthly payment, ask yourself whether you could really afford to pay this sort of amount in the event of a claim? While money is tight, you might consider a realistic excess and slightly higher monthly payments a better way to budget, particularly where when the unforeseen issues arise?

What about your valuables?

Policies often state that certain valuables have to be itemised on a home insurance policy to be covered. Particularly valuable jewellery, art, watches, family heirlooms, bicycles and such like. You may want them covered away from home as well as at home. If these valuables are important to you, be sure to have them suitably covered on your policy. If you are confident you can negotiate this with the insurance provider, then the comparison site maybe a good way to find the cheapest base premium, but be warned, many of these items will mean an increase in the insurance quote you initially received. The only way to ensure that the quote you obtained was really going to be the cheapest for you, would mean going to each on of the companies directly and finding out how much they increase the premium by for additions you require. Far better to have a professional advise you and be sure you have the right cover for the right items. And that brings us on to the next point, tailored advice.

What is the difference in using a broker?

It is easy to say that it is best to use a broker as Harvey Bowes is one. But the reality is that we are paid commission from the providers in the same way as Compare the Market and the other on line comparison sites. With many brokers, including ourselves, we won’t ask you to pay a fee for the advice we give on home insurance, but what you do get is a professional human being assessing what is really important to you, finding out what priorities you have for protecting your home and more importantly doing our very best to make sure it is competitive and within your budget.

If you want the cheapest cover available, we’re happy to find it. If you want to ensure you have the right cover, for the right excess, we’ll do that too. We’ll tell you about Legal Cover and Home Emergency and other additional features designed to protect you. But more so than anything else, certainly for Harvey Bowes, we won’t give permission to an insurance provider to run a credit check until you are happy you want to proceed – and even then it will be one if one at all, but with the recommended provider only. Add the fact that the advice is offered free of industry jargon and in plain English and you will have the knowledge about your home insurance policy you need and confidence it will cover what you want it to cover.

On a final matter, I have been contacted by clients when they have a claim to help fight the provider into paying out, on the odd occasion they are playing hard ball. I can’t imagine Compare the Market getting involved. But we do. You can get straight through to your personal advisor and talk to a human being who will help you in the event of a claim – and that is when you’ll need the help the most.

To talk to the team at Harvey Bowes about your home insurance requirements, please get in touch by calling us on – 029 2015 6918

or email us theteam@harveybowes.co.uk

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About harveybowes
Mortgage Broker and founding Director of Harvey Bowes Limited. A mortgage broking practice with bases in Cardiff & Poole, UK. We take a fresh and positive approach to mortgage broking which pays dividends for both our clients and frankly, ourselves. The team at Harvey Bowes are expert advisors in all aspects of mortgages from residential to commercial and buy to let.

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