Its Money Saving Handbook suggests that consumers often buy insurance that is overpriced and even unnecessary in some cases. Many people are buying insurance for items that are covered under existing policies, while others find they become trapped in a policy that is unlikely to pay out if they make a claim.

It cites identity fraud insurance as one example of surplus cover as many banks will cover losses if the fraud can be proven. Meanwhile, those buying mobile phone insurance might be surprised to find that their handset is covered under their home or contents insurance policy.

Author of the handbook, personal finance journalist Tony Levene, says: “You can buy insurance to cover yourself against almost any conceivable risk – even alien abduction!

“The insurance industry’s favourite phrase is “peace of mind”, but it uses this to justify policies that cost a lot and are almost impossible to claim against.”

The guide advises that the five types of insurance to be most wary of are: extended warranties; identity theft cover; payment protection insurance (PPI); mobile phone cover and accidental death and injury cover.

“Instead of just blindly following what the salesman says, people should carry out a risk assessment of their own and make an informed choice about whether they actually need the insurance, and whether it’s worth the premium,” says Mr Levene.

However, it also points out that some types of insurance, such as building and contents, life and car insurance are actually necessary or obligatory. It is worth carefully comparing insurance deals to find those that cover all your needs rather than taking out separate policies and paying twice for the same type of insurance. Levels of cover can vary widely, as can price, so it is worth obtaining several quotes, whichever type of insurance you buy.

The handbook also covers topics such as credit card switching, the pitfalls of remortgaging, reclaiming bank charges and saving money on fuel bills.

© Fair Investment Company Ltd