Over 50s Cover : What This Covers
Over 50’s life insurance from some provides can pay out a lump sum upon the policy holders’ death.
This type of life insurance policy is often used to cover expenses such as funeral costs or outstanding debts but can also be used to leave behind a small amount of cash for dependants or a legacy for relatives. There are normally no medical questions, and acceptance is often guaranteed and instant. There are usually no extra or hidden charges for smokers and you can sometimes control the cost of the premiums; it is your choice how much you want to pay.
Over 50s Cover : Who Needs This The Most
This type of life insurance allows peace of mind to anyone who wants a relatively small sum guaranteed to pay out when they die.
There are no restrictions other than your own budget as to what you wish to leave as a guaranteed legacy.
Many people may have not taken out life insurance, or think that they would be excluded because of health reasons or by being a long term smoker; the over 50’s plan from some insurers ignores all the usual hassles of underwriting and guarantees your policy value and acceptance immediately.
The plans are normally available to UK residents aged between 50 and 80 years old. Once you have taken out cover you will often be covered up until the age of 90 or on death.
For those of us over 50 getting life insurance seems both more important and more expensive. Sadly although we may see this as the prime of our lives, insurers factoring in risk realise that it's now more likely than ever that something unfortunate might happen. Even when our children have flown the nest it's important to leave something behind for them and our partners if the worst should happen and luckily for us specialist insurance policies are available than will provide us with appropriate levels of cover for our circumstances.
With increases in life expectancy and better medical care available premiums for this category of insurance aren't as high as they used to be and taking out over 50s life insurance is a viable option for most. Typical over 50s life insurance policies differ from level term life assurance policies, the kind that most will take out when younger, in that they are whole life policies. This means unlike level term policies which insure at a fixed level of payout for a fixed period of time, most over 50s life insurance policies will payout upon death no matter how long you live. In technical terms they are known as whole life insurance policies.
If this is not what you had in mind when you visited this guide don't be put off, fixed term life insurance policies for over 50s do exist but they are generally not aimed specifically at the older market - instead you should compared standard life insurance policies. However most people do opt for whole life terms at this age as it will ensure that money is paid out to help with costs such as funerals no matter how long you live for. Most policies marketed as over 50s life cover are whole life assurance.
Most of those who take out over 50s life assurance policies see them as a method of providing a guaranteed small inheritance to their family. Typically the payouts are relatively small and as such are mainly designed to provide a tax-free sum to help pay for funeral costs and to pay off any small debts you may have on your death.
Types of Policy and Premium
Different life cover policies will have different ways of paying your premium. There are three main types: fixed premiums, increasing term premiums and index-linked premiums. Each has it's advantages and disadvantages and making a choice depends both on personal circumstances and your view of future market situations. While some economists claim to be able to predict the latter, statistic of their low accuracy in making predictions show that you might as well rely on a historian or futurologist for the latter. Instead consider how risk adverse you are - if you want to avoid taking a risk that inflation will go up then an index-linked or increasing term policy would be best, if you'd rather save on costs and know your outgoings in advance but take a gamble on inflation staying low then fixed term policies are best.
The main disadvantage of the fixed plan is that the payout can be eroded by inflation. While inflation currently is at historical lows due to the financial crisis, it could creep back up again. Although it seems unlikely at the moment, your policy is likely going to be decades long and there's a reasonable chance of hyper inflation occurring and completely wiping out any value in your policy during this period. Current economic policy and the dominant school of economics teach politicians to keep inflation low, but dominant schools have fallen in the past - just look at Keynesian economics - and may fall again. If politicians decide there are more important economic indicators than inflation they might make decisions that could quickly erode your life assurance policy's payout value. Those who worry about these factors would prefer the increasing plan which has variable premiums but will keep up with inflation.
Variable and indexed linked policies aren't without risk either, as the premiums you pay will depend on factors such as the stock market and Bank of England interest rates. Each provider will have their own way of working out how premiums vary, but generally they will be relatively similar between providers. While the prospect of your premium jumping might seem daunting, remember that in most situations any pension you get from a pension fund will typically rise in a similar way protecting you from inflation. If you are living on savings or other forms of fixed income rather than a pension plan then a fixed premiums plan is probably preferable for you than a variable option. The choice ultimately is yours and both have risks attached.
Another option is a decreasing term insurance policy. This type of policy offers a larger amount of coverage earlier which gradually falls during the life of the policy. They are usually the cheapest forms of insurance but will often leave you with no payout if you are still alive at the end of the policy. With life expectancies increasing these haven't been popular in recent years and many providers have stopped offering them as over 50s products, but you can still take one out linked to your mortgage. The general idea is that as you pay off more of your mortgage there will be less outstanding, so the decreasing cover will always be able to pay off your mortgage.
Should you go for the funeral option?
Many providers offer a version of their life assurance where the funds are provided directly to an approved funeral director. These were initially provided due to the realisation that the most common use of life assurance policies were to help the family cover the cost a funeral. Typically an insurer will offer an additional sum if you choose to go with their plan specifically for funerals. Any money left in the policy that isn't used on the funeral will be paid to the estate of the deceased as with other life assurance policies.
The addition payout offered for the same premiums make this an option worth considering. There's two things to consider about the options - the first is financial, is the policy actually better value for money. As the funeral director will be chosen by the insurance company and often is linked to them it's possible that their fees are higher than other funeral directors available. While things may change by the time of payout, it's worth checking fees of other directors you would consider to see if they are cheaper than the option provided by the life assurance policy by more than the additional payout.
The second thing to consider is the type of funeral you want. While most funeral directors are happy to modify the funeral to your wishes and the preferences of your family, they might not specialise in the type of funeral you wish to have. If you are from a particular religious denomination you may prefer a funeral director who only conducts funerals for your denomination, or if you're wanting your funeral to be different in some other way then a specialist might be a better option. It might not be the easiest conversation to have, but bringing up the matter with immediate family before making a decision on this matter might be useful to gauge their preference too. You don't want to have a policy that pays out to a funeral director that your family do not want to use.
It's also worthwhile checking if you already have funeral benefit elsewhere. Many trade unions provide this to their members and you may not have even realised you were due to this benefit upon your passing. One of the reasons trade unions were founded in the nineteenth century was to give their members funds to pay for funerals when many were struggling, and many of the longer established trade unions never stopped providing this benefit to their members. It's not just trade unions that offer this though, and many other civil society organisations that you may have been a member of may help with funeral costs - these include credit unions, fraternal organisations and veterans organisations. It's worth investigating if you are entitled to any of these before choosing the funeral cover option to avoid your family losing out on a cash sum upon your passing.
How much cover is appropriate?
While this largely comes down to a personal preference of how much of your current income you'd like to put away to for your heirs and how much you'd like to keep available for other purposes whether savings or to spend, there are some considerations that will affect your decision. First and foremost is whether you are current debt free, including mortgage-free. If so the fees your estate will need to pay upon your passing are likely to be limited to funeral costs, and therefore a smaller amount of cover is appropriate. If you haven't yet paid off your mortgage and want for family to be able to live in it rather than being forced to sell then covering an amount that will allow them to pay off the mortgage and pay for funeral costs is a preferable option.
Remember though that your finances can go up and down, so it's best to over insure. If you need to go to a care home you may have to remortgage your home, having a little extra coverage will allow your family to repay this upon your death. The maximum amount of cover available on over 50s fixed guaranteed policies generally is low though, with even 50 year olds paying the maximum premium available usually seeing at most £25,000 payout. There's nothing stopping you taking out several policies with different providers though, and some providers will even let you take out more than one policy with them. Always read the small print though to make sure you don't go over the maximum cover offered.
Factors to consider other than price
With most insurance policies the primary factor you look at after you choose the type of premium you pay is price. While for many this shouldn't be any different with over 50s life assurance, there are others factors you will want to consider.
Perhaps the main differentiating factor between policies is how long you have to pay in before they will pay out. Typically the period is a year, but many will have longer waits before the payout can be made. Some will offer a refund if the initial period is not complete upon your passing, which will still provide your family with a small amount of money to help with funeral costs, but others won't refund. If you are healthy and have no reason to expect a payout for many years this is less of a consideration and thus your main determining factors should be payout and premium price, but for those who have more years behind them, whose health is failing or who have a family history of younger deaths should opt for policies with smaller initial periods.
Most over 50s assurance policies don't enquire into medical history and don't require a health examination. This makes them ideal for those in poor health or who have a lengthy medical history. For those who are in good health for their age and have other factors in their favour such as a good weight and not smoking, then a standard life insurance policy might work out as better value for money than policies designed specifically for the over 50s.
Another obvious consideration is the maximum age of the policies, which sometimes isn't stated obviously on the marketing materials of providers. 80 is the typical maximum age although some providers have both lower and higher maximum age limits, so even if you are over this age getting a policy is still worth considering. It won't even necessarily be more expensive, although your choice of providers will be limited and the cover generally very low. Remember insurers are taking a bet that you'll stay alive long enough to pay more premiums than the cover is worth, and each year you get older the higher the chances of death and the lower your remaining life expectancy will be, thus the covered amount for starting a new policy will be lower.
You won't be short of companies that are willing to provide you with a quote for this form of life insurance, so we can't review them all here but here are a selection of the largest providers.
Legal and General
Legal and General are one of the companies everyone's heard of and seen their rainbow-umbrella logo. They're generally a well trusted insurance and financial brand - in fact they were top for fixed term assurance sales in 2011. They provide two options for overs 50s life insurance: a fixed plan and an increasing plan. When we visited they were offering £50 of M&S vouchers to new customers and similar promotions are regular occurrences. You shouldn't choose a policy based on promotional gifts alone but it's a nice extra.
The fixed plan has premiums starting at £8 a month, although this is dependent on what age you start. It will pay out on your death and is life long assurance, so as long as you keep up with the payments it will eventually pay out. You pay premiums only up until you're ninety which is a added benefit for those of us expecting longevity. They will accept every application between the ages of 50 and 80 automatically with no medical or health assessment required. The policy doesn't pay out in the first two years unless death is accidental, although it will refund premiums paid. As many use these policies to help family with funeral costs Legal and General offer an option where in return for using a funeral provider of their choice, Dignity, you get an extra £250 in funeral benefit. This may sound a good option, although it's possible that another funeral provide may be more than £250 cheaper than Dignity so do your research before taking out a policy.
NatWest / RBS
After NatWest and RBS merged many of their offerings because the same, and their over 50s cover is no exception. They offer a over 50s fixed premium, fixed cover policy with guaranteed acceptance for those aged between 50 and 80 with no medical exam or questions. It starts at £6 a month, has a one year initial period with refund if not used and payout if death was through an accident. The premiums continue up until your 90th birthday.
Like many supermarkets Asda has recently moved into financial services and among its offerings are a over 50s life assurance policy. They offer both fixed premiums which start from £14.59 monthly and variable premiums starting at £5 a month. Their initial period is a year and they offer guaranteed acceptance without medical questions. Their funeral benefit is 10% extra up to a maximum bonus of a £1000 on top of the standard cover so worth considering - as with Legal and General the provider is Dignity.
Sun Life Direct
Sun Life is, thanks to regular advertising, is one of the most recognisable over 50s policy providers. They have over 810,000 customers for their fixed price plan making them one of the largest providers of over 50s cover. Their fixed cover insurance is guaranteed to accept anyone between the ages of 50 and 85 without medical questions. Their initial period is two years but unlike others they refund one and a half times what you paid in premiums if you die in this period. Their premiums start from £4 a month, which they claim is the lowest on the market and is the lowest we found, although your premium will depend on the amount of cover you choose and your age and can range up to £74. Their maximum cover is £25,000 which for most is enough. Their funeral option gives an extra £250 and is arranged with the Co-Operative Funeralcare. Although you shouldn't be swayed into making a decision based on the free gifts, they do offer a generous selection including a LED TV, Kindle or camcorder.
The Post Office
Gone are the days when the post office was just for sending letters and parcels. They now offer a fixed over 50s cover plan with premiums starting at £7 a month and ranging up to £50. Their initial period is a year and have a full refund of premiums if you should die in this period. They have the added benefit of doubling the fixed sum cover for death as a result of an accident. Their funeral benefit option offers an additional £250 and is arranged by the Co-Operative Funeralcare. Unlike many other providers they offer a easy to use table of how much cover is available based on your age and premiums. For instance if you're 60 and pay £40 a month the cover will be for £9815, while if you're 80 and pay when you start the cover your payout will be £3227.
Saga seems to be the company that offer everything for those of us over 50. Their fixed life insurance offering is available for those aged 50 to 85 without a medical. Their initial period is a year, with a refund if you die within this period, and their premiums start at £10 a month. They offer the same £250 Co-Operative Funereal benefit that other providers offer if you choose this option. One differentiating factor is access to services for those suffering serious illness while on their policy which could be specialist counselling or therapy depending on circumstances. They also have a £50 M&S voucher free gift.
These are just a short selection of the providers available, with many other insurers offering good policies. Many offerings are provided by the same insurer but with different premiums available between those offering the insurance. This is particularly the case with those offered by supermarkets and others who do not focus on financial products, this allows you to do some price comparison between very similar policies.
Over 50s fixed life assurance isn't for everyone but is one of the most common way of paying for funeral costs. The policies are best suited for those who don't already have savings large enough to cover all their debts and funeral expenses upon their death but who can afford to pay a fixed premium from their pension. Those seeking a higher payout than the typical maximum of £25,000 for those starting when 50 and lower for those who begin cover later should instead seek out a standard fixed term life insurance policy which will insure their age group. Many of these are happy to insure anyone up to 60 and some will insure beyond this point, although premiums will be higher than for the young they can still be reasonable and affordable if you are in good health.
Despite many health scares in recent years life expectancy continues to rise. Currently at age 65 a man can expect to live an additional 17.8 years and a woman will enjoy another 20.4 years (http://www.statistics.gov.uk/hub/population/deaths/life-expectancies). This varies considerably depending on where you live, but for most it means that you could well end up paying more into a life insurance fixed policy than the final payout is worth. Those who are very healthy for their age are therefore less likely to see a good return from a fixed over 50s life insurance policy than if they put their money into savings or if they've still got a mortgage a decreasing term or other life insurance plan that includes a medical exam. Those whose health is on the decline however are perhaps better advised to opt for a over 50s insurance policy as even death within the initial period usually results in at least a full refund.
Content by Robert Prime