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Over 50s life insurance – is it worth it?

If you’re age 50 or above and you’re thinking about funeral planning or giving you and your family peace of mind, over 50s life insurance, also known as whole of life insurance, can seem an easy and cheap way to provide cover. But these plans may not be best for your needs. This guide explains how they work and what to watch out for.

What is over 50s insurance?

An over 50s life insurance plan is a type of policy for people usually between the ages of 50 to 85. 

You pay a fixed monthly premium and the policy guarantees to pay out a cash lump sum – known as a ‘payout’ or ‘sum assured’ – to your loved ones when you die.

The money left for your loved ones is often used to help contribute towards funeral costs, but it can be spent however they wish.

How does over 50s insurance work?

  • You must be over 50 – remember, the older you are, the more your monthly premium will be for the same payout.
  • Guaranteed acceptance – you don’t need to answer any health questions or get a medical check to be accepted for cover.
  • You pay a fixed monthly premium for the rest of your life or the age set out in the policy agreement – this means your insurance company can’t increase your premium so the amount you pay each month never changes.
  • You’re guaranteed a fixed payout when you die – if you take out a plan, you can choose what payout you would like, which means you know exactly how much it will be.

What to watch out for with over 50s life insurance

Although an over 50s life insurance plan might seem like a straightforward way to provide a lump sum for your loved ones, it can actually be poor value for money and there are things you need to be aware of before you take one out Here’s what to think about:

You may get less out of the policy than you’ve paid in

If you live an average age of 80 or above, you’ll end up paying in much more than you’ll get out. 

For example, you take out an over 50s plan costing £20 a month when you’re 55, that guarantees to pay out £5,000 when you die. 

By the time you get to the age of 76 you’ll have paid in £5,040. For every year you live after that, you’ll pay £240 for nothing.

If you stop paying the premiums, your cover will be cancelled

If you live an average age of 80 or above, you’ll end up paying in much more than you’ll get out. 

For example, you take out an over 50s plan costing £20 a month when you’re 55, that guarantees to pay out £5,000 when you die. 

By the time you get to the age of 76 you’ll have paid in £5,040. For every year you live after that, you’ll pay £240 for nothing.

Some causes of death may not be covered

Some policies might not cover death as a result of drug, alcohol abuse, so it’s worth checking this first.

Inflation can erode the value of the payout

The sum you insure yourself for is fixed when you take out the policy. Over time, increases in the cost of living can reduce its value. If you’re using the plan for funeral planning, the payout might not be enough to cover your funeral costs when the time comes.

This is a particular problem if you take your policy out in your 50s and continue to live for another 30 years or more.

Most policies won’t pay out straightway

Be aware, these policies can have a waiting period of around one to three years before they will pay out, unless you have an accident. 

The waiting period will be in the terms and conditions so it’s important to check what this is before you consider buying, especially if you are terminally ill.

When an over 50s plan might be a good idea

If you’re in poor health and you don’t expect to live a long life, an over 50s plan might be for you because typically there’s no medical check when you take one out and you’re likely to pay in less money than you will get out at the end.

But before deciding, it’s a good idea to look at other options for paying for a funeral or planning to leave lump sum.

Alternatives to over 50s life insurance

Over 50s life insurance might seem tempting but can end up being expensive way to plan for your funeral and still leave your loved ones having to deal with unexpected expenses after you die. Here are some alternatives to think about before you decide.

Put money into a savings account

Putting a little money aside each month is one straightforward way to save for a funeral.

This isn’t risk-free though, as you might die before you build up enough to pay for a funeral. And many people worry that they might not have the discipline to leave their savings untouched.

But, if you can be sure to leave the money untouched, it’s one way to guarantee a lump sum of money that will be available to put towards your funeral costs.

Find out why it’s a good idea to save regularly and the saving options available to you in our guide Getting into the savings habit.

Use money in your current account

Most banks will release funds for funeral costs before probate is finalised and before inheritance tax is calculated. An itemised bill from a funeral director and copy of the death certificate is usually all that’s required. If you have a joint account with a loved one, then they will still have access to the full sum of money.

Use the money you leave behind in your will

You might have assets that can be sold when you die, such as your house. You could make it clear in your will that you want these to be used to pay for your funeral.

But it can take some time for properties to be sold after someone dies. So, it’s worth talking to the family member who you want to arrange your funeral and checking that they have enough to pay upfront.

Check death in service employment benefits

If you’re still working some employers provide a payout if you die while you’re still working for them. Typically, this is lump sum three to four times your annual salary paid to a nominated family member.

If you’re a member of a trade union, professional body or other association, they might pay a benefit when a member dies. Contact them to find out.

Check if your loved one would qualify for Bereavement Support Payment

If you and your spouse or civil partner are under state pension age (currently 66) and your spouse or civil partner dies, you might be eligible for a Bereavement Support Payment. The payment is a lump sum of 2,500 plus 18 monthly payments of £100. 

If you have dependent children and you’re claiming Child Benefit for them, your spouse or civil partner could claim a lump sum of £3,500 and 18 monthly-payments of £350.

Be aware, that if you live with your partner but aren’t married or in a civil partnership, you currently can’t claim Bereavement Support Payment, so you’ll need to think about other ways to pay for your funeral or provide them with lump sum.

Compare regular life insurance

It is worth comparing an over 50s life insurance with regular life insurance policies as you may get more generous cover. See our table for some of the main features to help you compare and find out more in our guide What is life insurance?.

What’s the difference between over 50s life insurance and regular life insurance?

Over 50s life insurance Regular life insurance

To apply, you must be aged be 50 or above. The maximum age can be up to 85, depending on the policy.

You’ll need to be age 18 to take out a life insurance policy. The maximum age limits set by life insurance providers vary.

You will not be turned down when you apply, regardless of your health.

Your eligibility, premium and cash payout is based on your personal circumstances, for example, your lifestyle, medical condition and family history.

 

Even if you have a health condition a regular life insurance policy may be cheaper.

You can only take out a single policy.

You can choose a joint policy or a single one.

The amount of cover available with an over 50s plan is less. If you need more cover, you may want to consider taking out a regular life insurance policy.

The amount of money paid out depends on the level of cover you buy.

 

You can also vary the term so it is not for the whole of your life but perhaps until your mortgage term ends or you children reach the end of full-time education, or until you retire.

There are concerns that over 50s life insurance is not considered to be good value because if you live an average age of 80 or above, you’ll end up paying in much more than you’ll get out.

Life insurance is generally considered to be good value but it depends on your circumstances.

 

A policy giving your loved ones a decent amount of financial protection can cost from just a few pence a day. But cost varies, depending on several factors.

If you keep up with the monthly premiums, it guarantees to pay out a fixed lump sum when you die.

The payout will normally be bigger. For example:

  • to help pay off your mortgage if you die during the term, and
  • leave behind a lump sum for your children if you die before they reach financial independence.

If you live longer than the period of cover, you won’t get a payout. Our guide What is life insurance? has lots of info on the different types of life insurance available and how it works.

How do I buy over 50 life insurance?

We recommend you shop around and compare different ways to save up a lump sum to help with funeral planning or provide security for your loved ones after you die.

If you decide an over-50s plan is right for you here’s what to think about before you buy.

Premiums and the amount paid out can vary, so it’s worth shopping around and compare different quotes. You can get quotes from:

Before you consider buying a policy, it’s important to check and compare terms and conditions. For example, the how long the waiting period is before they will pay out and whether the policy covers death as a result of drug, alcohol abuse.

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