|
| Travel & Holiday Insurance |
|
|
|
Check out supermarket financial products
By Jeff Salway
Motor insurance
According to Which?, drivers pay on average around £500 a year for car insurance, but rates can vary widely. Tesco is in the driving seat when it comes to the supermarkets, most of which have been promoting their motor insurance deals aggressively in recent months.
Supermarkets tend to offer good deals on the low-risk policies, but less competitive prices as the risk increases, so it's worth shopping around - unless you have a clean licence, drive a family car and live in a low-risk area.
Tesco recently launched a 'value' motor insurance product bridging the gap between fully comprehensive and third-party cover, but it excludes young drivers, doesn't offer a courtesy car and can only be bought online.
And when it's time to renew your policy it may be worth shopping around again. Companies often give the best deals to new customers, and then hike the premiums up substantially in the following years.
The quality of the product varies between different companies. While Tesco targets that 'perfect' low-risk customer, Marks & Spencer Money targets more affluent customers, who are prepared to pay a bit more for a more expansive policy.
Credit cards
While supermarket credit cards are far from the worst on offer, they are too expensive to threaten the best buy tables. They all offer 0% balance transfers, however, with Tesco offering this until March 2007 and Asda for six months. Sainsbury's has a balance transfer offer on its Standard and Platinum cards of 0% for 10 months, then 5.94% until the balance is repaid, although this then reverts to an APR of 15.9%.
The cheapest in terms of APR is Tesco, with 12.9% on its Bonus credit card. The best Sainsbury's offer is 13.9%, while the highest placed Asda card is an unappealing 19.7%. Tesco is also the most competitive when it comes to balance transfers, with 0% transfers and purchases until January 2006, and 12.9% thereafter.
Supermarket credit cards are commonly linked to store loyalty schemes, where customers can accrue bonus points or vouchers when they spend on the card. However, these benefits often fail to compensate for the higher rates, and should only be used by customers who use the card regularly and pay off the full balance every month.
Loans
In terms of the best rates, loans are still the domain of the banks and building societies. The likes of Northern Rock, Direct Line and Moneybackbank (part of Alliance & Leicester) have made this a very competitive market, leaving the supermarkets and other retailers in their wake. The best supermarket offer is 6.1% with Sainsbury's - not bad, but go to Direct Line and Moneybackbank and you could get 5.6%.
And as with insurance, supermarket loans apply stricter credit profiling criteria than many other providers. This means you have to be the right 'fit' before they offer you their lowest rate. So if you've had any credit problems in the past, it's highly likely you won't qualify.
As with any loan provider, the chances are you'll be encouraged to buy payment protection insurance (PPI). It's worth double-checking whether you need this, and if you do, shopping around for a better rate. The Office of Fair Trading has been investigating PPI for several months, after a Citizen's Advice 'super-complaint' accused banks and credit card companies of mis-selling policies to customers who would not be able to make a claim or could not afford the extra payments. It estimates that taking out PPI can add between a quarter and a third to the cost of a loan.
Savings
With banks and building societies falling over themselves to attract new custom by offering high savings rates, the supermarkets have less to tempt savers, even though some accounts allow you to make deposits at the checkout.
Sainsbury's has several saving options, with its best rate of 4.75% on its online account. This compares well with other online instant access accounts, but Sainsbury's hasn't yet established a firm reputation for maintaining rates over the long term.
While this is a great deal for instant access, there are better deals to be had from the banks if you're willing to have your money tied up for a year and take out a regular savings account. Barclays and Alliance & Leicester are currently paying 10%, but these are only available if you hold a current account with the bank. Halifax pays a lower rate of 7%, but is open to all customers.
Asda doesn't have a savings account but it does offer a stakeholder-compliant child trust fund.
Life and critical illness insurance
Most of the controversy surrounding supermarket providers concerns protection insurance, such as life insurance and critical illness. Buying the wrong protection policy has serious implications as you rely on the payout in the case of illness or death.
However, although the Financial Services Authority (FSA) considers critical illness a complex product with greater risk to consumers, supermarkets sell it in the same way as more straightforward products such as savings accounts. This means, although it's a complex product, you're expected to know exactly what you need when you make your purchase.
Kevin Carr, head of protection strategy for LifeSearch, a protection adviser, points out that although the proliferation of supermarket products means more people are covered, buying insurance without advice causes problems. "Independent financial advisers are obliged to recommend the most suitable product. Without that advice, you're more likely to buy an unsuitable policy that gives you only the bare minimum of cover," he explains.
Carr also points out that, without advice, not many people buying life assurance and critical illness would know to place their policy in trust - a vital step that helps mitigate inheritance tax.
According to Terra Blu, a specialist financial intermediary, if you have a condition such as raised cholesterol, hypertension, asthma or diabetes, you won't be able to claim on most supermarket insurance policies. In fact, it says, to be covered at all you will need to be in very good shape. Richard Gould, managing director of Terra Blu, says: "Unless you're a non-smoking 28-year-old with no pre-existing medical conditions or history of family illness, most supermarket policies will be unsuitable for you."
Supermarket insurance products also give you less protection if your policy fails to pay out, because the Financial Ombudsman Service has far less clout when a product has been bought without advice. Mike Naylor, principal researcher for Which? magazine, says that supermarkets need to make it clearer that they do not give advice or make recommendations. "Our concern is that people aren't made sufficiently aware of the availability or otherwise of advice," he says. "There's no great danger here for car or house insurance, but you should take advice if you're buying protection insurance."
In terms of rates, Tesco, the only supermarket offering critical illness cover, has the cheapest policy on the market, according to data supplier Moneyfacts. Monthly premiums (for a 30-year-old non-smoker, on a 25-year term, sum assured £100,000) are £22, with 27 conditions covered, a similar number to most providers. However, your chances of being eligible for this rate could be minimal. The same applies to normal life assurance where, given the same scenario, Sainsbury's and Asda are pipped only by AA Insurance in terms of rates, although Tesco is a lot less competitive.
So, should you add financial products to the groceries on your weekly shopping list? It depends largely on how risky and how complex the product is. Also, although supermarket rates are competitive, they rarely offer the best deals. The key is to shop around, because in virtually every area covered here, there are better alternatives to the supermarket deal. Only when you have a good idea what else is available - and in the case of protection insurance, sought advice - will you know if the offer that caught your eye at the checkout is the best deal you can get.
Useful links:
|
Send Article by Email
Send Article by IM
Blog This with Y! 360
Printable View