Everyone wants to ensure that their family is looked after when they’re gone. With funeral costs, inheritance tax and general expenses to deal with, knowing that your family has a safety net once you pass away can bring you peace of mind.
For this reason, life insurance for over 50s is very popular amongst those who’ve reached retirement. This insurance policy will guarantee that your family has the money they need in the event of your death, or it can help you leave a thoughtful gift to those you love.
But do you really need life insurance in retirement? Keep reading to find out more about the pros and cons of over 50s life insurance.
Over 50s life insurance is a type of life insurance policy specifically for UK residents aged 50-85. With this insurance policy, you’ll pay fixed monthly premiums to receive a tax-free fixed lump sum of cash upon your death, helping your loved ones cover funeral costs or stabilise their finances.
Life insurance for over 50s offers ‘whole of life’ cover, which means that you’ll be covered for the rest of your life as long as you keep paying your fixed premiums, no matter how long you live. Some insurance providers will even allow you to stop paying premiums if you reach the age of 90, and you’ll still be entitled to the full payout once you pass away.
However, to offset some of the risks of insuring elderly people, insurance providers set a one or two-year waiting period. This means that your life insurance will not be paid out if you die within this period, although your life insurance provider may still pay in the case of accidental death. Usually, your monthly premiums will be refunded if you die within the waiting period.
So, what’s the difference between life insurance and over 50s life insurance?
First of all, the main difference is that over 50s life insurance offers ‘guaranteed acceptance’. This means that you’ll be accepted for a life insurance policy even if you aren’t in great health. In fact, unlike with regular life insurance policies, you won’t even have to disclose your medical information at all. However, your age and smoker status will be recorded and may influence the overall cost of your policy.
In addition to guaranteed acceptance, over 50s life insurance also offers whole of life cover, whereas regular life insurance commonly covers a specific term (learn more about term life insurance here). Despite this long-lasting cover, your monthly payments won’t increase over time, which can make this life insurance policy cheaper.
However, if you stop paying premiums for any reason and don’t catch up during the grace period, your policy will stop and you won’t be entitled to any of the insurance money. Your final payout also won’t increase over time with inflation, which could mean that the payment isn’t substantial enough to cover your funeral costs when you eventually pass away.
Regular life insurance policies will typically offer larger payouts, but your monthly premiums could be larger too. Therefore, life insurance for over 50s can be a cheaper option, especially if you’re older and have health issues, but you need to decide if the payout will be enough for your needs.
Unfortunately, many people still have misconceptions about over 50s life insurance, which means that they may not be taking advantage of this life insurance plan when they really should. Let’s debunk the myths:
Ultimately, if you're trying to decide whether you need life insurance for over 50s, you need to look at your personal circumstances to figure out how much cover you need and what you’re willing to pay. For example, if you want to provide for your family and make sure your funeral expenses are covered in advance, getting an over 50s plan could help you achieve this without forcing you to pay sky-high premiums.
On the other hand, there are some drawbacks you need to consider. Since your premiums and the eventual payout are fixed, you could actually end up paying in more than you get out if you live for a long time, and you can’t stop making payments as this will prevent you from getting your money. Therefore, if you’re in good health and expect to live for a long time, you may be better off not getting over 50s life insurance or waiting a few more years (although life insurance over 60 and above involves more expensive monthly payments).
Additionally, if you already have substantial savings or your partner can financially support your family when you pass away, you may decide that you don’t need a life insurance policy. Or, if you’re not sold on the over 50s plan, you could opt for a regular life insurance plan. This may be worth it if you’re still in good health and you want a larger cash sum.
Another option is to choose a funeral plan instead of over 50s life insurance. A funeral plan is fantastic for those who only want to save for their funeral instead of saving for other expenses or a cash gift for their family.
With a funeral plan, you’ll pay for your funeral in advance at current prices within a specific time frame (e.g., 12 months). As a result, you’ll be paying more initially compared to an over 50s life insurance plan, but you won’t run the risk of your funeral costs becoming larger than your insurance payout as your funeral plan will protect you against inflation.
If the funeral plan sounds interesting to you, then you could still take advantage of this type of policy even if you already have over 50s insurance.
Some life insurance providers offer a funeral benefit option, which can be added to your over 50s life insurance plan to help you save specifically for your funeral. In this type of insurance plan, your full lump sum of cash will go straight to a funeral service provider to cover the cost of your funeral. If you wish to cancel your funeral benefit option add-on, then this money will go to your estate instead.
With so many over 50 life insurance deals to choose from, it can be difficult to find the perfect one for you. That’s why Money Expert is committed to helping you compare life insurance quotes and policies so you can get a plan that truly fits your needs. If you're a UK resident aged 50-85, get in touch with Money Expert today to start discovering a huge range of comprehensive and cost-effective life insurance policies.