You can't move for incentives from insurers
Many policies now dangle cashback of up to £50, but will the cover itself be the right price? Kate Hughes reports
Sunday 01 February 2009
Insurance providers have long tried to tempt us with incentives to take out their cover, and as the credit crunch has made us more money-conscious so cashback offers have been coming in thick and fast. The idea is that providers get your long-term custom in return for a few pounds upfront, but are these deals worth the money?
The latest entrant to the incentive game is Tesco, which last week unveiled a £50 cashback deal on a year's car insurance for Clubcard loyalty scheme members. Other forms of insurance are getting in on the act too. Take a buildings and contents policy with the Halifax, for example, and you could earn £50 initially and £50 every year you renew the policy. Pet insurance from LV= offers £10 cashback.
In practice, you pay the full premium price upfront and then receive a cheque after a few weeks or months. But the risk is that the cashback could blind customers as to whether the policy itself is competitive.
"Overall, cashback can be a great perk when buying insurance, but it shouldn't be at the expense of getting the best price and cover that meets your needs," says Martin Saville at consumer watchdog Which?
"A £50 cashback isn't worth going for if the premium itself is, say, £100 more expensive than a competitor's quote for the same cover offering no cashback."
"Don't let these offers detract from the basic criteria you need in your policy," agrees Tom Wilson of price-comparison site Confused.com. "Cashback is only ever going to be worth it if the rate is a good one and it fulfils all your basic needs. It should be a nice bonus, not the main reason for choosing a particular policy."
The cheapest non-cashback deal on car insurance currently available, for the average driver with a Vauxhall Vectra V6, is from LV= at £155.37, or £14.73 a month, says price-comparison site Moneysupermarket.com. But it's a no-frills deal for that price; legal cover, a courtesy car and breakdown cover will cost an extra £61.80 in total.
Swinton's deal is £161.47 with up to £50 cashback if you go via a price- comparison site, taking the basic cost of the policy down to a bargain £111.47. It includes a courtesy car, but adding breakdown cover will set you back another £82, and legal and personal accident cover will add further costs.
The most comprehensive cover with cashback costs £231.31 with Endsleigh, or £21.61 a month. That includes legal cover, a courtesy car, personal accident insurance and windscreen cover, along with £30 cashback, bringing the total bill down to £201.31.
If you are shopping through a price- comparison site, where you are most likely to find cashback offers, you need to keep a close eye on the process. "Insurers may offer cashback of, say, £35 on policies bought through these sites," says Mr Saville. "But if you then decide to take out the cover directly with the insurer, check you're still getting the cashback before you sign up. Alternatively, an insurer may offer cashback if you buy direct, but not if you use a price-comparison site. And bear in mind that if you cancel the policy during the year, you'll probably have to repay the cashback."
Another option is to go through a third-party site like Cashback.co.uk, Quidco.com or Giveortake.com, which could make you more money. For example, home and contents insurance from Lloyds TSB could earn you as much as £75 .
And if the policy is bought using a credit card, you could also benefit from any cashback deal on the plastic. Abbey's credit card, for example, offers a blanket rate of 3 per cent on all transactions.
But bear in mind that the period between taking out your policy and receiving your cash can be as long as three months. This is usually done to dissuade customers from taking out the policy, then cancelling it as soon as they get the money.
The cash payment itself is generally automatic, but some providers demand that you actively claim the cashback yourself. The motive for this, critics suggest, is a hope that many customers will simply forget.
"This can be a real problem," Mr Wilson notes. "Some offers need customers to be diligent to get the money." In fact, following enquiries from The Independent on Sunday, Moneysupermarket has now introduced a policy of only recommending deals that have automatic cashback.
Cashback could also be a false economy in other ways, because the chances are we would spend the money instead of putting it against the cost of the insurance. "We are all human," says Mr Wilson. "It's easy to look at this money and decide to spend it on yourself, especially as you won't receive that cash until later."
- 1 Three of Pope Francis' relatives die in Argentina car crash, including two young great-nephews
- 2 Michael Brown shooting: Amnesty International sends team within US for first time as National Guard deployed
- 3 Here’s the damning letter Robin Williams wrote to his Mrs Doubtfire co-star's principal after they expelled her
- 4 Ferguson protests: 90-year-old Holocaust survivor Hedy Epstein ‘arrested’ by police during St Louis demonstrations
- 5 Cilla Black defends Cliff Richard: 'I am positive that the allegations are without foundation'
Isis threat: Cameron wants an alliance with Iran
Crisis? What crisis? A visiting US doctor gives the NHS a rave review
Ukip MEP calls for reintroduction of death penalty on fiftieth anniversary of last deaths
Russell Brand calls for Israel boycott: Comedian urges big businesses that 'facilitate the oppression of people in Gaza' to pull funding
Michael Brown shooting: Chaos erupts on the streets of Ferguson after autopsy shows teenager was shot six times – twice in the head
World peace? These are the only 11 countries in the world that are actually free from conflict
iJobs Money & Business
£700 per day: Harrington Starr: Quantitative Developer C++, Python, STL, R, PD...
£30000 - £44000 per annum + Bonus+Benefits+Package: Harrington Starr: Web deve...
£40000 - £65000 per annum + benefits+bonus+package: Harrington Starr: Senior A...
£35000 - £45000 per annum + benefits+bonus+package: Harrington Starr: Web deve...
Day In a Page
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony