What is over 50s life insurance?
Over 50s life insurance, as the name suggests, is a life insurance policy specially designed to meet the unique needs of people aged 50 and over. It is sometimes referred to as ‘over 50s life cover’ or an ‘over 50s plan’.
You pay in a fixed, monthly premium and the policy will pay out a fixed, cash lump sum to your beneficiaries, on death. The pay out is often used to cover funeral costs or leave an inheritance.
50 is often the age when your mortgage is largely paid off, the children have left home and well-paid management jobs are secured. However, you may need life cover that reflects these changing circumstances.
Over 50s plan vs standard life insurance
Over 50s policies are a form of whole of life cover and are guaranteed to pay out when you die, (as long as you pay your premium). This is sometimes called ‘life assurance’ – as a pay out is assured at some point.
In contrast, a standard life insurance policy provides cover for a set period of time, (term). Although these policies tend to pay out much larger sums and are used to cover long-term family living costs and mortgages.
As you get older, especially if you have had medical problems, securing affordable life insurance, becomes much harder. There could also be restrictions on the length of the term an insurer is willing to protect you.
As a result, for many an over 50s plan, which does not require a medical and guarantees acceptance, is more suitable.
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The benefits of an over 50s plan:
- You are guaranteed to be accepted, (even if in poor health)
- You do not need to undergo a medical or answer health questions, (unlike standard policies)
- They are quick and easy to set-up
- You can choose, how much you wish to pay, based on what you can afford
- Your premiums could stop when you reach 85 or 90 years, (but the cover will remain in place)
- Fast pay out when a claim is made.
Why choose over 50s life cover?
People choose to take out over 50s cover for a variety of reasons. From our experience at Reassured, common reasons include:- Covering the cost of your funeral, (average UK cost in 2017 is £4,078)
- Leaving an inheritance to your children or grandchildren
- Ensuring your spouse has sufficient funds to maintain their lifestyle, (living costs, household bills, disposable income)
- Cover unpaid bills, or any outstanding debts.
The cost of over 50s life insurance?
Another common reason people take out an over 50s policy is cost. Although you can pay more, many choose to pay in just a few pounds each month, making cover very affordable.You decide on a monthly premium that you can afford and we (or the insurer) can inform you on the level of cover this will afford you. This is often a good option if you are on a fixed income and/or a small budget.
As mentioned earlier, once you pass 50, getting standard life cover can become very expensive, as statistically you are more likely to die during the policy.
How much cover can I take out?
The 3 main factors that determine how much over 50s cover you will be able to secure are:- Your age, (when taking out the policy)
- Whether you are a smoker
- What premium you would like to pay/can afford each month i.e. £5, £10, £15 etc.
Over 50s life insurance no medical exam
When you take out life insurance, many insurers will want to know about your current health, before they agree to insure you.Normally, providers do this via a medical exam, which will check things like blood pressure, weight, BMI, medical history and general fitness.
However, most over 50s plans do not require a medical, which can be very beneficial if you have existing medical conditions or are in poor health.
The rising cost of a UK funeral
Over 50s plans have become very popular in recent years. This is in part due to the rising cost of a funeral and people provisioning for their passing.According to research undertaken by SunLife, the cost of a funeral in the UK has increased 112% in 13 years. What’s more, this figure is projected to rise further in the coming years.
- Average cost of a basic funeral – £4,078 (£1,920 in 2004; £4,944 by 2022)
- Average cost of professional fees – £2,899
- Average spent of discretionary costs – £1,928
- Average total cost of dying – £8,905
However, this does not tell the whole story because there are massive regional differences in cost. While in London a funeral will cost £5,951 on average (+45.9% above the national average), in Northern Ireland the cost is £2,982 (-26.9% national average).
Although, the increasing cost of a funeral is scary, it is important to remember that this element makes up just 46% of the overall cost of dying.
You can read more on the rising cost of a UK funeral on our blog post »
An over 50s example scenario:
Derek is a 55-year-old lorry driver in poor health. He is severely overweight and recently suffered a heart attack.He has 3 children, all in their 20s, who he does not want to burden if the worst were to happen. He has little in the way of savings.
His recent health scare has made Derek think seriously about the future and what he would leave behind. However, because he represents a high risk for insurers, he is unable to secure traditional life cover, at an affordable price.
He decides his best option is to take out an over 50s life insurance plan; there was no medical or health questions on the application and he was able to set his premiums at a rate he could afford.
Because Derek fears he might not live into his 70s/80s, he feels an over 50s plan represents the best value, as he is unlikely to pay in more than the policy pays out.
Waiting period (or qualifying period)
Over 50s policies will not pay out within the first 12 or 24 months (depending on the insurer) – this is known as the ‘waiting period’ (or ‘qualifying period’).Applicants are over 50 and have not undergone a medical and thus are deemed a higher risk. As a result, insurers employ a waiting period at the start of the policy to mitigate their risk.
During this time you will, however, receive a full accidental death benefit. So, if you die as a result of an accident, you could get up to 3 times the assured sum – (exclusions apply).
If you die of natural causes during the initial waiting period, at least the amount you have paid in will be returned to your beneficiaries.
After the waiting period has expired, there are no exclusions and you are fully covered.
Write your over 50s life insurance in trust
In life insurance terms, a trust is simply a legal arrangement designed to ensure that the pay out from your policy is distributed as you intended.The policy is looked after by a nominated trustee until the time comes for the benefit to be released to your beneficiaries.
Because the policy has been written in trust to the trustee/s, the proceeds avoid forming part of your legal estate.
The key benefits of writing your policy into trust are:
- Avoid or minimise 40% inheritance tax (over the £325,000 threshold)
- Avoid the lengthy probate process (for a faster pay out)
- Have more control over who gets the funds and when.
Fix your premiums
Over 50s plans are not always suitable
It is important to remember there is a chance, especially if you have just turned 50 and are in good health, that you could pay more in than the policy will pay out.So, depending on your individual circumstances, traditional term cover or a whole of life policy may represent better value for money.
See this great tool from life insurance provider Aviva, that helps estimate your life expectancy www.direct.aviva.co.uk.
Over 50s life insurance in summary:
Pro’s
- Guaranteed acceptance – (A policy can be taken out by anyone who is resident in the UK for at least 6 months of the year and aged between 50 – 80)
- No medical exam required
- Medical history not taken into account, (although smoking can increase the cost of the policy)
- Good option for those in poor health
- Choose a monthly premium you can comfortably afford
- Monthly premiums are fixed
- Pays out a fixed lump sum
- Easy to set up a policy
- Quick pay out after a claim is made
- Many policies now include a clause that gives you free cover after you turn 90.
Con’s
- The total sum paid in premiums could exceed the fixed pay out
- If you miss a premium payment you may lose your investment
- There is a waiting period of 12 or 24 months, (depending on the insurer)
- If you die during the waiting period, you may only get back what you have invested
- You cannot cash in over 50s plans
- Inflation may reduce the ‘real-term’ value of your pay out.
Why use Reassured to compare over 50s life insurance?
- Life insurance is what we do, (in fact, it is all we do)
- We will scan the market on your behalf, finding the most suitable and competitive quotes available
- 13,500+ people cannot be wrong! We have an ‘Excellent‘ average Trustpilot rating of 9.6/10
- We are completely independent and impartial
- We never charge a fee for our broker services
- There is no obligation to take out cover
- We are non-advised – we simply listen to your personal circumstances and find the most suitable policies.
Talk to our Reassured consultants on 0808 168 2025 and let us help you compare the best available over 50s life insurance quotes.