Life insurance with cash back

20 min Read Published: 07 Jun 2022

Life insurance with cash backIn this article, we take a look at some of the best life insurance with cashback deals available, explaining how they work and whether they offer good value.

What is life insurance with cash back?

Life insurance with cashback is an offer of money back to the customer when they complete a life insurance purchase. Usually, life insurance cashback offers are introductory offers that life insurance providers and introducers use to attract new customers to their products and services. A cashback offer can be very enticing but shrewd consumers will try to get the best deal on the service or product they wish to purchase before looking for a cashback incentive just in case the value of the cashback has been built into the purchase price.

Cashback deals on life insurance may not be as good as they look once you compare products and services across the market. In some cases cashback is offered with no strings attached and we will show you one such offer from a vetted life insurance specialist, where can get you up to £100 cashback later in this article.

What is life insurance?

Life insurance is personal insurance that pays a cash payment if the insured person dies. It can be a lump sum or an income that pays for a period of time. Life insurance can provide financial security for your family, pay off your debts including a mortgage or even funeral costs if you die.

There are different types of life insurance, some types of life insurance cover the person that is insured for a period of time and only death within that period of time will result in a claim (term life insurance) and other types of life insurance will cover the insured person for the whole of their lives and will pay a claim upon death whenever that happens (whole of life insurance).

You may choose to also include critical illness insurance with your life insurance so that you can claim money if you become seriously ill. Critical illness cover comes at an increased cost.

Good life insurance cover will usually include terminal illness benefit at no extra cost and it pays out if you have less than 12 months to live, giving you financial security in a difficult time.

Cashback deals are usually offered alongside decreasing term life insurance policies, otherwise known as mortgage protection life insurance as well as other term life insurance policies like level term life cover. Over 50s life insurance plans or funeral plans can also be found with similar deals attached to them however they generally come with a gift card offer and we cover that later in the article.

You can find more information about the different types of life insurance that you can buy in our article, "Types of life insurance explained"

How to buy life insurance with cashback

Most commonly, you will have to buy your life insurance online and complete the application process yourself without guidance or advice in order to qualify for any cashback reward. There are usually other caveats too, such as a requirement to pay your monthly premiums for up to 12 months before the cashback is paid to you.

However, you can occasionally also get cashback by using a life insurance broker where you would receive advice, support and assistance to buy your life insurance. We share one that we've vetted later in this article that will pay up to £100 cashback when you purchase a policy and if you'd like to go straight to that section, you can jump ahead here.

There are a number of offers to buy life insurance with cashback and these can be found online and through many brokers of life insurance. The main offers can be found on cashback platforms such as Quidco and Topcashback but some companies such as Smart Insurance offer a percentage of your premiums back in the first year instead.

How much cash back can you get with life insurance?

You can get up to £2,000 cashback when you buy life insurance but in reality, most people will not need life insurance that costs £200 to £250 per month, which is what you need to be spending in order to qualify for the highest life insurance cashback deals. The tiered offers of cashback mean that you're more likely to qualify for around £100 cashback and the headline cashback offer is usually unavailable to most. We have vetted a life insurance broker that offers up to £100 cashback while finding you the cheapest price for your life insurance which we describe later in this article.

Life insurance with gifts

Life insurance that offers a gift when you start your cover is widely advertised and often associated with Over 50s life insurance policies which are otherwise known as Funeral plans. Over 50s life insurance plans are usually sold with offers of gift cards for outlets such Amazon, Argos, M&S and so on. You can read a full breakdown of the top life insurance with gifts cards in our article, "Over 50s life insurance: We rank the best FREE gifts"

Best life insurance companies that offer cashback

A number of life insurance companies offer cashback when buying a life insurance policy. These include:

  • Aviva
  • Legal & General
  • LV=
  • Royal London
  • Beagle Street
  • Smartlife insurance

You will find these companies with cashback offers but the offers vary over time and depending on where you come across them. At the time of writing, Aviva, Legal & General and LV= have offers of cashback through the most popular cashback websites - Quidco and Topcashback.

How does life insurance with cashback work

There are a few different ways in which life insurance with cashback works and we've listed the most common types of cashback offers and how they work below:

Buy life insurance through a cashback site

These offers tend to show large cashback rewards of up to £2,000 in the headlines. You'll normally have to spend around £250 per month on your life insurance policy and then pay that premium for around 6-12 months to receive the maximum cashback reward.

Test: I tested a cashback reward that offered £1,000 cashback for policies that were bought with a premium between £150 to £200 per month. Once I clicked through on the offer, the insurance company limited the life insurance to £100 per month and at that premium, the amount that the life insurance would cover was in excess of £2million for a healthy 30-year-old person. Most people don't need £2 million of life insurance and the insurance company knows this so and so most people are unlikely to be able to claim the large ticket cashback.

So I looked at a more reasonable amount of life cover - £350,000 over 30 years and I was quoted £18 per month which would mean I could get £150 cashback reward after 6 months of paying for the policy. All was good until I realised that I could get the same cover with the same insurance company after completing a price comparison with a leading life insurance broker for £13 per month, meaning a saving of £1,800 over the period of the life insurance policy. In effect, the £150 cashback would have cost me £1,650 and that isn't even factoring in the effects of inflation.

Verdict: You can get some cashback from these types of offers but it is clear to see that the cost of the cashback is more than recouped by the insurance company by charging you more for your life insurance from the outset.

Quidco life insurance cashback deals

Insurance company Maximum value of cashback available*
Co-op £225.50
Shepherds Friendly £250
Royal London £1,000
Legal & General £1,000
Virgin Money £1,050
Sainsburys Bank £1,050
LV= £1,145
Moneysupermarket £2,025
Confused.com £2,100

*Available at the highest monthly premium levels as well as a requirement to meet the terms and conditions of each deal

Cashback at the end of your life insurance plan if you don't claim

Insurance plans that offer to return your premiums if you don't claim can be extremely attractive especially because there can be a sense of annoyance in paying for insurance that you may not claim against. The reality is that most insurances are like this. We buy car, home, travel insurance just in case the unexpected happens and generally, these types of insurance don't pay anything back when it doesn't, but can be invaluable when it does.

How to get all your premiums back at the end of your life insurance if you don't claim

Test: I enquired with a company that offered all of your premiums back when you buy a 10-year life insurance policy for £25,000 for £25 per month.

I stopped short when I realised that it would cost me £2.17 per month for a healthy 30 year old for the same life insurance through a leading life insurance broker instead of £25 per month - the difference in price is astounding and amounts to £2,740 over the period of the insurance policy.

In order to receive the premiums back at the end of 10 years, I would also have to keep the policy for a full 10 years as there is no refund if you don't keep the policy for the full term.

Verdict: Consider taking the extra money that you would spend here and either putting into a savings account or investing it. I did the maths and below is a summary of how a life insurance deal that offers you all your premiums back at the end of the policy compares with buying equivalent life insurance without cashback and putting the extra money you would spend on the cashback deal in a savings account or investing it.

Cashback deal comparison for £25,000 level term life insurance over 10 years

Option to buy life insurance Monthly Premium Upfront cashback Total cost after 10 years Money back after 5 years Money back after 10 years
Cheapest price £5 up to £100 £600 £0 £0
Cheapest price + save £20 pm in bank* £25 up to £100 £3,000 £1,230 £2,524
Cheapest price + invest £20 pm** £25 up to £100 £3,000 £1,361 £3,100
All premiums back at the end of the policy style deal £25 £0 £3,000 £0 £3,000

*assumes 1% interest per annum. **assumes 5% per annum return as per FCA mid growth rate

Verdict: Any cashback deal that promises all of your premiums back if you don't claim should be approached with caution. Work out how much the insurance would cost without the cashback promise, work out the difference in costs and consider investing that difference so that you are able to reap the rewards of your investment or savings while retaining access to your money at any time.

10% of your first year's life insurance premiums returned

If a company offers you part of your first year's premiums back once you reach the end of the first year, this is quite similar to receiving a cashback sum once you complete either 6 or 12 months of payments. Instead of a fixed cashback sum, the cashback on this type of deal will be variable depending on how much you pay for your life insurance. Like the other cashback deals, this type of offer appeals to people because there is the promise of something in return for your payments.

Test: I looked at a popular life insurance company that offers new customers a £100 gift card once they have paid 6 months' worth of premiums as well as 10% of their first year's premiums back at the end of the first year of the policy. I enquired about £300,000 of level term life insurance for family protection over 30 years. The monthly payment for this was £52.74 but I could get the same life insurance with AIG through a leading life insurance broker for £23.91 per month.

Cashback deal comparison for £300,000 level term life insurance over 30 years

Type of life insurance deal Cashback Monthly premium* for £300,000 over 30 years level life insurance The overall cost of life insurance
Cheapest price  £100 £23.91 £8,607.60
Price with 10% return on 1st year's premiums 10% of 1st year's premiums = £63.28 + £100 Amazon gift card £52.74 £18,986.40

*monthly premium based on a 40-year-old person in good health 

Verdict: Over the period of 30 years, I would have paid £10,378.80 more for my life insurance with this type of life insurance deal than I would have done if I had bought the same life cover at the cheapest price in the market. It is clear that the cashback incentive is outweighed by the extra cost of the life insurance policy from the outset and makes the cash reward a false advantage.

Is it worth taking cash back with life insurance?

Most of the big-ticket cashback offers when you buy life insurance are poor value for money and in the examples that we tested, the cashback reward is much less than the extra cost you will incur when you buy life insurance this way.

How to buy life insurance at the best price + £100 cashback

A leading life insurance broker that we have vetted provides its customers with advice, support and guidance to choose the most appropriate type of life insurance for their needs at a competitive price and when you buy your life insurance, you'll receive up to £100 cashback. To arrange a callback from one of the advisers at this company, complete this form*.

Not only will you receive up to £100 cashback, but you'll also receive guidance and advice to nominate your beneficiaries through a trust so that any payout can bypass probate avoiding any inheritance tax. There is also a dedicated claims team that will assist your family with any claims if required.

Life insurance with cashback summary

Our research has shown that the cost of the cashback reward is built into your monthly premium payments.

It is worth remembering why you're buying life insurance in the first place and whether that is to protect your family, pay off a debt or simply pay for your funeral. Choosing the right type of cover at the right amount and for the right time period are all things most people need guidance with. Buying your life insurance with a trusted and reputable insurance broker* or life insurance company can provide extra peace of mind and a better customer service experience so that if your family has to claim, they are in good hands.

Comparison sites and companies that spend more time explaining their cashback rewards to you than the relevance of their financial products are less likely to provide you with life insurance cover that is tailored to your needs.

 

 

If a link has an * beside it this means that it is an affiliated link. If you go via the link, Money to the Masses may receive a small fee which helps keep Money to the Masses free to use. The following link can be used if you do not wish to help Money to the Masses and do not wish to qualify for the cashback referred to in the article