Thursday August 21

Consumers should tread carefully over cash back deals for life cover

Consumers looking for life assurance to protect their loved ones are being urged to assess the full cost of cover over the term of the policy when selecting the best deal.

The warning from Moneyfacts.co.uk follows the launch of a new life product from the Post Office, which offers a £100 cash back bonus to anyone taking out either a level or decreasing term assurance policy.* Whilst on the face of it £100 looks to be a generous incentive, consumers may be able to obtain cheaper cover elsewhere that would outweigh the financial benefits of the cash back deal over the longer term.

Although the premiums on offer from the Post Office are more competitive than many of the other direct providers, a better deal can still be found elsewhere for consumers willing to shop around. For instance, a female non-smoker aged 30 looking for £250,000 of level term assurance over 25 years would pay total premiums of £3,425 with the Post Office once the £100 cash back has been taken. However, by opting for the most competitive premium currently on offer from AA Insurance Services, the same customer would pay just £3,099, a longer term saving of £326. In this particular scenario Egg, Legal & General, and Lutine Assurance could also provide a greater saving despite not offering the attraction of a cash back deal. The table below shows how the Post Office deal stacks up with other providers over the longer term.

Comparative costs for level term life assurance

Based on a 30 year old non-smoker taking out single life cover of £250,000 for 25 years

Notes: e = Rates available directly from Legal & General or via an IFA if applied for electronically.

Richard Eagling, from Moneyfacts.co.uk said: “Consumers need to look at the bigger picture and calculate the overall cost of their cover over the full term. Cash back deals may seem attractive for some products such as mobile phones, but for longer term deals such as life assurance, where the consumer may be paying the same premium for 25 or 30 years, care needs to be taken. Consumers also need to ensure that the actual product matches their requirements as the consequences of opting for the wrong life cover can be far more serious than simply opting for the wrong mobile phone contract.”

To check out the best life assurance deals visit www.moneyfacts.co.uk

Notes to editors

*  A minimum premium of £10 per month is required to qualify for the £100 cash back  offer. The cash back bonus is redeemable after the 12th monthly

Go Direct.co.uk is a trading style for website purposes of Go Direct UK Ltd.
Go Financial Services is a trading style of Go Direct UK Ltd which is an appointed representative of Personal Touch Financial Services Ltd which is authorised and regulated by the Financial Services Authority Registered in England & Wales Company 5703224