What is over 50s life insurance?
As the name suggests, this type of cover has been designed specifically for those over 50 years old. Over 50s plans are commonly used to provide money to help pay for funerals or simply to provide financial support to those left behind.
The main features of over 50s policies are:
- Cover usually lasts until you die, no matter when (i.e. there is no set term)
- There are usually no medical questions to answer
- Acceptance onto the policy can be guaranteed
- Premiums are usually more expensive than regular term insurance
- Some policies may not pay out within the first two years (except for accidental death)
How does it work?
You pay a monthly premium to the insurer. In return the insurer agrees to pay a lump sum of money to your family when you die. The lump sum of money is referred to as the ‘sum assured’.
If you stop paying your monthly premiums at any point, your cover may be stopped. Some insurers will stop demanding premiums after your 90th birthday and will provide cover for free until you die. Others however will require you to pay your premiums for life.
Unlike term insurance where there is a specified time frame for the policy to pay out, over 50s life insurance is a whole of life policy. This means it will pay out whenever you pass away (as long as you’ve kept paying your premiums and also survived past any minimum term before the cover will pay out).
Is an over 50s plan right for me?
Unless you have cover in place already, over 50s life insurance can provide peace of mind knowing that whenever you should pass away, your family is financially protected (again this assumes you’ve kept up your premium payments and also survived past any minimum term before the cover is ‘active’).
Over 50s plans can also be a good option where a regular term or whole of life policy has been refused due to medical conditions.
Can I take out a regular policy instead?
Yes. Just because you’re over 50 this doesn’t mean that you’re limited to taking out an over 50s plan. Whilst insurers do have maximum age limits for acceptance, these can be as high as 70 years old.
Regular term insurance can be much cheaper than an over 50s plan but will only pay out if you die within the term of the policy.
Unlike over 50s policies, term insurance will require you to answer a series of medical and lifestyle questions. If you suffer from pre-existing medical conditions, an over 50s policy (where no medical is required) could be a better option. If you’re fit and healthy however, a regular term insurance policy could prove much better value.
“Just because you’re over 50 this doesn’t mean that you’re limited to taking out an over 50s plan”
As long as you’re over 50 but no older than the insurer’s maximum age limit (usually around 80 but sometimes older), lots of insurers will guarantee to accept you onto an over 50s policy.
The insurers are able to do this because as a person over 50, you’re automatically at a much higher risk of death. For this reason, insurers needn’t bother with medical questions and simply base your premiums on the amount of cover you’d like, your age and whether or not you smoke.
Insurers protect themselves from paying out on customers with serious medical conditions by stating that any policy holder must survive past a minimum term before the policy will pay out. If death occurs before this time, some insurers will return any premiums paid to your loved ones. This minimum term is usually around 2 years but can vary by insurer.
What if I die within the first two years of the policy?
Most over 50s plans won’t pay out within the first 12 or 24 months of the policy starting unless the death is caused by an accident (as opposed to an illness or natural causes).
Should death occur during this time, most insurers will return as much as 150% of the premiums paid.
How much cover do I need?
You can choose the amount of cover you take out. How much cover you need will depend on your individual circumstances, but it may be worth considering:
- The cost of your funeral
- Any outstanding debts that would need paying if you passed away
- Any money you’d like to leave as a gift
The amount of cover you choose may also be determined by what you can afford. Most insurers will be able to tell you how much cover they’d be prepared to offer you for any given budget.
It’s very important that you can keep up your monthly payments because cancelling or missing payments could leave you without cover. Unless stated otherwise, there is no cash-in value with over 50s life insurance so you can’t ‘withdraw’ any money paid in to the policy.
Most insurers enforce a maximum cover amount. Often this is much less than a traditional whole of life or term insurance policy. This means over 50s life insurance may not be suitable to cover a large mortgage or other larger debts. A traditional term or whole of life policy may be more suitable if this is the case. Over 50s policies are usually limited to a maximum premium between £50 and £100 per month.
Sometimes there can be a minimum premium or cover amount. Minimum premiums are often no more than £5 or £6 per month. However, it’s worth remembering that the cheapest premium may not provide adequate cover for your needs.