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

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."

PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Finance Assistant - Part time - 9 month FTC

    £20000 - £23250 Per Annum pro rata: Clearwater People Solutions Ltd: Pro rata ...

    Marketing Manager

    £40 - 48k + Benefits: Guru Careers: We are seeking a Marketing Manager to join...

    Market Risk Manager - Investment Banking - Mandarin Speaker

    £45,000 - £65,000: Saxton Leigh: Our client is a well-known APAC Corporate and...

    Compensation and Benefits Manager - Brentwood - Circa £60,000

    £60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...

    Day In a Page

    Isis in Syria: A general reveals the lack of communication with the US - and his country's awkward relationship with their allies-by-default

    A Syrian general speaks

    A senior officer of Bashar al-Assad’s regime talks to Robert Fisk about his army’s brutal struggle with Isis, in a dirty war whose challenges include widespread atrocities
    ‘A bit of a shock...’ Cambridge economist with Glasgow roots becomes Zambia’s acting President

    ‘A bit of a shock...’ Economist with Glasgow roots becomes Zambia’s acting President

    Guy Scott's predecessor, Michael Sata, died in a London hospital this week after a lengthy illness
    Fall of the Berlin Wall: History catches up with Erich Honecker - the East German leader who praised the Iron Curtain and claimed it prevented a Third World War

    Fall of the Berlin Wall

    History catches up with Erich Honecker - the East German leader who praised the Iron Curtain and claimed it prevented a Third World War
    How to turn your mobile phone into easy money

    Turn your mobile phone into easy money

    There are 90 million unused mobiles in the UK, which would be worth £7bn if we cashed them in, says David Crookes
    Independent writers remember their Saturday jobs:

    Independent writers remember their Saturday jobs

    "I have never regarded anything I have done in "the media" as a proper job"
    Lyricist Richard Thomas shares his 11-step recipe for creating a hit West End musical

    11-step recipe for creating a West End hit

    Richard Thomas, the lyricist behind the Jerry Springer and Anna Nicole Smith operas, explains how Bob Dylan, 'Breaking Bad' and even Noam Chomsky inspired his songbook for the new musical 'Made in Dagenham'
    Tonke Dragt's The Letter for the King has finally been translated into English ... 50 years on

    Buried treasure: The Letter for the King

    The coming-of-age tale about a boy and his mission to save a mythical kingdom has sold a million copies since it was written by an eccentric Dutchwoman in 1962. Yet until last year, no one had read it in English
    Can instilling a sense of entrepreneurship in pupils have a positive effect on their learning?

    The school that means business

    Richard Garner heads to Lancashire, where developing the 'dragons' of the future is also helping one community academy to achieve its educational goals
    10 best tablets

    The world in your pocket: 10 best tablets

    They’re thin, they’re light, you can use them for work on the move or keeping entertained
    Lutz Pfannenstiel: The goalkeeper who gave up Bayern Munich for the Crazy Gang, Bradford and a whirlwind trawl across continents

    Lutz Pfannenstiel interview

    The goalkeeper who gave up Bayern Munich for the Crazy Gang, Bradford and a whirlwind trawl across continents
    Pete Jenson: Popular Jürgen Klopp can reignite Borussia Dortmund’s season with visit to Bayern Munich

    Pete Jenson's a Different League

    Popular Klopp can reignite Dortmund’s season with visit to Bayern
    John Cantlie video proves that Isis expects victory in Kobani

    Cantlie video proves that Isis expects victory in Kobani

    The use of the British hostage demonstrates once again the militants' skill and originality in conducting a propaganda war, says Patrick Cockburn
    The killer instinct: The man who helps students spot potential murderers

    The killer instinct

    Phil Chalmers travels the US warning students how to spot possible future murderers, but can his contentious methods really stop the bloodshed?
    Clothing the gap: A new exhibition celebrates women who stood apart from the fashion herd

    Clothing the gap

    A new exhibition celebrates women who stood apart from the fashion herd
    Fall of the Berlin Wall: Goodbye to all that - the lost world beyond the Iron Curtain

    The Fall of the Berlin Wall

    Goodbye to all that - the lost world beyond the Iron Curtain