While cashback on Mortgage Protection is always appealing, before thinking short-term, consider where the real value exists!
The fact is the best long-term fixed price and not any cashback offer makes much more sense in terms of real cost-savings.
Combine this with the added peace of mind that if your health declines, you’ll never pay a higher premium, or have to go through the whole application and underwriting process again, nor the lender assignment process when it comes to Mortgage Protection insurance.
Cashback Costs You Money
Ask yourself, do you want more money in your pocket in the short-term, or consistently over the long-term?
The simple fact is that if you opt for cashback on any type of Mortgage Protection, you will pay higher premiums than necessary from year two onwards.
How you’re most likely thinking, sure why not take the cashback and replace the policy with a cheaper long-term fixed premium later on?
Well, there’s a whole host of problems:
- You can’t return to the same insurer to replace a policy once cancelled.
- As you get older, the cost of any protection policy increases, based on age at set up.
- No one knows when a health issue may occur, preventing you from switching.
- You will have to go through the whole application and assignment process all over again.
- Some policies require 2 years before the cash-back is made fully payable.
Cash Back – Why it’s offered on Mortgage Protection Insurance
It’s simply a carrot to do business as the insurance broker knows that from experience, most people will forget about trying to replace their policy with a cheaper alternative, or not discover the potential pitfalls until they later attempt it and it’s too late to get a better deal.
Comparing Real Cost-Savings V Highest Cash Back Offered
Below, I have provided a worked example of a Mortgage Protection policy, but the same principle applies to any protection policy.
Mortgage Protection – Worked Example
Male, 50 years 6 months (14/11/1973), Non-Smoker, life cover €280,000
Female, 41 years 1 month (18/04/1983), Non-Smoker, life cover €280,000
18-year term, 1% levy included.
Offer A: 50% Cash Back (effectively halves the first year’s premium)
20.88 *12 = 250.26
41.75*12 *17 yrs. = 8,517.00
Total cost: 8,767.26
Offer B: 25% cheapest Market discount (first month free)
39.14* 11 = 430.54
(39.14*12) *17 = 7,984.56
Total cost: 8,415.10
Warnings
- Be careful of fraudulent websites offering deals that far exceed all other well-known broker brands, investigate the broker.
- Do not be fooled by websites that outline large cost-saving figures, they base it on the dearest market price in comparison.
- If the website looks cheap it should be a red flag.
- Website links that appear organically under a search engine as opposed to Sponsored (paid ad) are longer established and more credible businesses.
- Be careful of websites that send you quote options but no application form without a phone call, they are seeking to upsell.
Conclusion
If you’re considering any kind of cash-back offer, ask yourself, do you want more money in your pocket in the short-term or consistently over the long-term? The run your quote.
How I can help
Ken O’Gorman – Director – CB, QFA, SIA, RPA
To arrange your free protection consultation, contact us today, call: 01 845 0049 or email me directly: ken@onequote.ie
