Consumers urged to assess full cost of 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.

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.”