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."
10 tips for taking out a personal loan
Simon Read: Frozen in time - the expat British pensioners who deserve a better deal
Simon Read: If this is BT's idea of 'simple', beware if it gets complicated
Donald MacInnes: My wasted hours in the retail deserts of Dixons-Carphone
Pension firms must ask consumers more questions, says City Watchdog
- 1 King Salman: Just five days in, Saudi Arabia's new king has already overseen a beheading
- 2 The BBC has just done more to eradicate ‘terrorism’ than all our wars since 9/11
- 4 Presidential optical illusion offers clues to how brain processes faces
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
French court convicts three over homophobic tweets, in case hailed as a 'significant victory' by LGBT rights campaigners
Greece elections: Syriza and EU on collision course after election win for left-wing party
British Muslim school children suffering a backlash of abuse following Paris attacks
British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
Liberal Democrat minister defends comments suggesting immigration causes pub closures
iJobs Money & Business
£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...
£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...
£16500 - £16640 per annum: Recruitment Genius: This fast growing Finance compa...
£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...
Day In a Page
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
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