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Life cover - think twice about cash back deals

Moneyfacts.co.uk urges people looking for life assurance 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. The incentive of £100 looks generous, but you may be able to obtain cheaper cover elsewhere which outweigh the benefits of the cash back deal.

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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 people who shop around.

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.

By choosing the most competitive premium currently on offer, the same customer would pay just £3,099 with AA Insurance Services, a longer term saving of £326.

Cash back deals are attractive for products like 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. You 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.

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