EVER taken out mobile-phone insurance, payment protection, or an extended warranty on your latest gadget? While protection from life’s uncertainties is sensible, some of these products are a waste of money and can leave people without cover when they need it most.

Last month, the City watchdog, the Financial Services Authority (FSA), rapped banks, building societies and credit-card firms for continuing to sell dodgy loan cover. It has already fined five financial firms, including GE Capital and Capital One, for failing to point out the pitfalls.

Mortgage lenders, mobile-phone companies and electrical retailers are among the worst when it comes to pushing worthless or overpriced cover.

The UK insurance industry is the largest in Europe and third in the world, according to the Association of British Insurers – more than £32 billion in insurance premiums. Much of it is a waste, according to comparison firm Moneysupermarket.com.

Richard Mason, the firm’s insurance expert, said: “Many people are paying for insurance they’ll never use, while others are paying more than they need to. You could save an average of 35% by shopping around.”

Here are five of the most expensive and frequently mis-sold types of cover:

1. Payment protection insurance

About 7m PPI policies are sold each year when people take out loans, mortgages and credit cards. It is one of the biggest money-spinners for the banks – worth £5.4 billion a year. High-street stores also push the cover to buyers of electrical goods.

It is supposed to cover your mortgage, card or loan if you are unable to work due to an accident, sickness, or if you lose your job, but it is expensive and riddled with exclusions, which are often not clearly explained.

Most policies do not pay out for conditions like back pain or stress and the self-employed are also not usually included. Policy-holders often don’t realise they are excluded until they claim, because the small print is rarely explained at the point of sale.

The cover also has one of the poorest payout records in the industry: only 20% compared with 80% for car insurance for example.

Millions are believed to have had cover forced on them by high-pressure salesmen who include PPI in loan premiums and don’t say it’s optional.

Ask yourself if you need it. Many companies offer sick pay for several months if you are unable to work due to illness or an accident, in which case you might only need redundancy insurance. But PPI policies don’t pay out for about two months, and in that time you might have found work.

2. Mobile phone insurance

Many retailers sell you cover when you sign up to a new contract, which can add between £5-£10 a month. The insurance will cover lost or stolen handsets. Some will also cover the cost of fraudulent calls but you may have to pay a premium for this. The standard cover from 02 does not cover any calls made.

You may already be covered through the personal possession clause on your home contents insurance anyway. If you’re on holiday, your travel insurance could also provide cover.

3. Extended warranties

Britons spend £800m a year on extended warranties that retailers often try to sell with electrical goods. These policies are hugely costly: a five-year guarantee on a £200 washing machine could cost more than £120.

Also known as service agreements or cover plans, extended warranties pay for repairs to or replacement of an appliance and normally begin after the manufacturer’s guarantee finishes.

A Which? consumer report on product reliability showed that 81% of washing machines did not break down in the first six years. Those that did however, were most likely to break down in the first year, in which case you are usually covered by the manufacturer’s guarantee.

4. ID theft protection

Which? has dubbed identity theft insurance the “most useless financial product” and suggests consumers would be better off buying a shredder.

Fraud-prevention group Cifas said there were nearly 40,000 victims this year until June. Once they have stolen your ID, fraud-sters might use your personal details to apply for credit cards or loans. As a result, companies, including Halifax, BT and Royal Bank of Scotland, offer ID-theft protection, but critics have accused them of cashing in on people’s fears.

Halifax’s Identitycare policy costs £6.95 a month and policy-holders receive a monthly update of any activity on their credit file. If a fraud occurs, a Halifax caseworker will negotiate on their behalf to recover the losses.

However, you can obtain your credit file for £2 from the three credit reference agencies – Call-Credit, Equifax and Experian.

It is very unlikely that you’ll need to take legal action if you’re a victim of ID fraud. The most you’ll usually be liable for is £50.

5. Train ticket insurance

When you book your train ticket though thetrainline.com, you are charged £1 travel insurance unless you untick the box. Unlike most insurance products, you have to opt out of this rather than opt in.

Martyn Hocking of Which? Money said: “Any policy that forces consumers to opt out and is included as standard should ring alarm bells.” The Trainline website says it is simply a way to “draw your attention to the benefits of insuring your travel”.

So what are the benefits? The policy covers the cost of the ticket if you miss your train due to a medical condition. You have to get a note from your GP within 28 days to get a refund. You are not covered if you miss your train because of delays.

The insurance is also meant to cover for any baggage that’s stolen, but you’ll need a police report to make a successful claim. If you simply forgot your luggage, or if there is any damage, you’ll not be covered.

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