Approaching retirement after decades of work is an exciting prospect. Your 60s are also a crucial decade to consider whether life insurance works for you and your family. Many people lose death-in-service benefits when they retire and start considering life insurance policies for the first time. You wouldn't be alone if this change in circumstances has you thinking about the inheritance you will leave behind and how your dependents will support themselves when you die.
The good news is that many life insurance products cater to individuals 60 years old and above. The bad news? Your choices will be more limited and more expensive than those who took out policies in their earlier years. That is the nature of life insurance. The longer you wait, the more expensive it gets. Therefore, it is critical to inform yourself about the options available to you as soon as possible so you can choose the best life insurance, or explore other options, for yourself and your family.
In a previous article, we looked at how life insurance premiums change as you age. We found that people in their 50s had many mainstream policies covering them and terms of up to 30 years available to them. Premiums were relatively affordable too. Monthly premiums for people in their 50s started at around £30 per month and were cheaper for non-smokers.
People in their 60s, on the other hand, had to make do with shorter terms and monthly payments ranging from £50 to £100 per month. Our investigation illustrated just how much difference in choice and price a single decade of waiting can make. You can read more about it here.
Is looking into life insurance in your 60s even worth it? It depends on your circumstances. There are several options to consider and a few reasons why you might wish to take out life insurance in your 60s.
What types of life insurance cover are available to me?
While access to life insurance plans is more limited in your 60s, you will still be eligible for over 50s life insurance and term life insurance. Term life insurance could work well if you're interested in cover for a specific period rather than whole of life cover. There are both level-term and decreasing-term options as well, depending on the amount of cover you need.
Over 50s life insurance
Over 50s life insurance is sometimes known as seniors life insurance. It is a specialised product that caters to over 50s and does not require medical underwriting. This means you don't have to disclose your medical history or pre-existing health conditions, answer any medical questions, and benefit from guaranteed acceptance.
Over 50s life insurance lasts for the rest of your life. You will sometimes see these policies referred to as a whole of life insurance policy. So as long as you pay your premiums, your loved ones will receive a lump sum when you die. However, because this type of policy is riskier and guarantees a payout, the cash sum your loved ones will receive is generally capped at around £25,000, depending on your policy.
While the payout amount is limited, even covering your funeral costs can ensure your loved ones don't have to worry about finances when you die. Some people also use this type of policy to cover any potential inheritance tax liability.
Term life insurance
Term life insurance options are still available as a 60-year-old and beyond. However, many insurers will only offer shorter terms with higher premiums once you reach 60. In addition, many mainstream insurers won't provide this type of cover beyond 90.
If you're looking for a guaranteed payout and expect to live beyond 90, this might not be the best policy to consider. However, if you're looking for a higher payout for a specified period, this type of cover might suit you well.
Term life insurance is generally taken out to cover mortgage payments or provide for dependents, like your children or spouse. Depending on your needs, you may consider level term life insurance or decreasing term life insurance.
Level term vs decreasing term life insurance
Level term and decreasing term policies are both types of term life insurance that guarantee a payout if you die within the cover period. However, how that payout works differs between the two.
A decreasing term policy is usually taken out to cover a loan, like a mortgage. The value of the policy falls as the term progresses and you pay off your loan. The idea is that if you die before you pay off your loan, your loved ones are not left out of pocket. This type of cover is a good choice if you're looking to ensure that the mortgage is covered.
A decreasing term policy is usually cheaper than a level term policy. It offers peace of mind that your loved ones will not be left out of pocket if you die suddenly. While the average level-term policy for a person in their early 60s costs around £30 per month, a decreasing term policy costs around £20 per month, resulting in a significant saving.
A level term policy is more expensive but offers a set payout for your loved ones regardless of when you die as long as the policy is still active. So, for example, if you are insured for £100,000, your loved ones will receive £100,000 even if you die days before the end of your policy term. This type of policy works well if you have an interest-only mortgage or want to make sure that your loved ones have a significant inheritance when you die.
What are the benefits of taking out life insurance in my 60s?
Taking out life insurance comes with many benefits. First, a decent policy will offer you peace of mind, and that alone could make it worth it. In addition, the payout will ensure your loved ones are supported when you die.
Insurance providers can also tailor life insurance quotes to your needs. For example, your policy could pay out just enough to cover funeral costs, the outstanding balance on your mortgage, or to provide an inheritance for your loved ones.
Some life insurance plans also payout early if you are diagnosed with a critical illness or terminal illness. This allows you to use your life insurance as you wish and take care of your affairs before you die.
Many people also take out life insurance for the inheritance tax benefits that it offers.
Inheritance tax benefits
A life insurance policy can be an excellent way to save on any potential inheritance tax. Depending on the value of your estate, your loved ones may be liable for inheritance tax, which is currently set at 40%.
If your estate is valued below £325,000, your dependents won't need to pay inheritance tax. However, your beneficiaries will need to pay 40% tax for anything above this threshold. Writing your life insurance into a trust is one way to get around this. The money goes directly to your beneficiaries and is not considered part of your estate, making it a more straightforward way to pass on your wealth.
Some people take out life insurance just so they can help loved ones cover their inheritance tax bill. Learn more about using your life insurance payout to cover an inheritance tax bill.
What are the drawbacks of taking out insurance in my 60s?
The older you get, the more expensive life insurance becomes. Insurers are also less likely to offer longer terms. Insurers generally only offer term life insurance up to the age of 90, regardless of when you choose to take out a policy. Higher premiums and limited insurance terms could make life insurance an expensive choice.
While there are tailored policies guaranteeing acceptance and payouts when you die, these often don't make financial sense for healthy people who expect to live a long life. The premiums you end up paying could be more than any potential payout your loved ones will receive. Also, if you take out a £10,000 policy in your 60s but end up living another 30 years, it is likely inflation will devalue your policy, and your dependents won't benefit much at all.
Life insurance might not make financial sense if you have no dependents or your partner earns enough to support your family if you die suddenly.
Many life insurance providers and comparison sites provide a life insurance calculator to make it easy to understand the level of cover you need. You simply enter details like your life expectancy and whether you want your policy to act as a funeral plan, and you can easily see if affordable life insurance is available and makes sense for your circumstances.
Over 60s life insurance
Your 60s are an exciting decade of change. But as you move into a new phase of your life, your financial situation needs to be looked at too. If you have dependents, a few years left on your mortgage, or even a hefty estate that will result in a significant inheritance tax bill, you may wish to see if life insurance works for you.
Premiums will be more expensive and options more limited than if you had opted for life insurance earlier. However, there will still be providers that offer the cover you need. Whether you opt for term life insurance to cover outstanding debts or an over 50s life insurance policy to pay for your funeral, a decent policy could give you peace of mind. You can live in comfort knowing that your loved ones would be looked after financially if you died suddenly.