Life insurance is sensible for all to consider at some stage of their lives. With life insurance, you essentially purchase the peace of mind that a cash benefit is provided to your loved ones after you die. Of course, the unique caveat of life insurance is that the longer you live, the more it’ll cost you, and as such, there is always a chance that the value of the payout or policy will drop below the sum of your premiums.
When we pass our 50th birthday, over-50s life insurance becomes an option. Over-50s life insurance policies are unique in that they require no medical underwriting and acceptance is usually guaranteed.
That means you can always take out over-50s life insurance, regardless of any health conditions, financial status or long-term conditions. All you’ll need to do to guarantee a payout is to pay your premiums and stick to any T&Cs!
Where to Find Over-50s Policies
Over-50s life insurance policies are easy to find and compare using most comparison sites. Simply input your personal information to receive quotes from major UK insurers. You can also find reviews and testimonials from customers past and present.
Insurers are rigorously scrutinised in the UK. Even so, customers still end up paying over the odds for overall poor value over-50s policies. Thoroughly investigating insurers for their track records and public trust is paramount. Which? and Money Saving Expert are two excellent resources for cross-checking and scrutinising your quotes.
How Does Over-50s Life Insurance Work?
Over-50s life insurance is straightforward compared to other forms of life insurance. You pay a monthly premium in return for a guaranteed payout that will usually be provided to the beneficiaries named in your will. Some insurers can instead place your life insurance in a Trust, where you’ll have already named the beneficiaries separately from your will. If you do this, the policy payout may be exempt from inheritance tax.
The greater the monthly premium you pay, the greater the payout at the end of the policy will be. The payouts from over-50s life insurance are usually quite limited, the maximum being somewhere around £15,000, though some may extend to £25,000, enough to cover funeral costs, pay debts, and provide cash gifts to loved ones.
To guarantee the payment, you will usually have to pay the premium for a set number of years. For most insurers, payments stop when you reach your 90th birthday, but for some, you will have to continue paying until you die.
How Does Over-50s Life Insurance Differ From Other Life Insurance?
Over-50s life insurance is generally for those that do not already possess a ‘Whole of Life’ life insurance plan. The crucial difference between over-50s life insurance and other life insurance is that acceptance is usually guaranteed, regardless of health. This means anyone above 50 and below 80 can take out over-50s life insurance.
Over-50s life insurance is not an investment scheme, and you’re pretty much locked in for the duration of the policy. The policy will not have a ‘cash value’ you can release or borrow against, and if you stop paying, you’ll simply lose the policy and any premiums you have paid.
Additionally, over-50s life insurance usually sets an upper age limit beyond which you will not have to pay (usually 90 or 30 years from the date you took out the policy). Other forms of life insurance may require you to pay until you die.
Common Features Of Over-50s Life Insurance
Most life insurance will require a full medical history and financial statements. Over-50s cover may rarely ask you to declare whether or not you smoke, but otherwise, there are no questionnaires or medical underwriting. They are available to all, regardless of medical or financial status.
Pay-outs are fixed once you’ve successfully paid premiums for a minimum period that will usually last a year or two. If you die before this qualifying period is met, the premiums you had paid until then will usually be refunded, but there will be no lump payout. If your death was accidental, the full payout might still be guaranteed. This varies between insurers.
Most insurers will fix premiums for the duration of the policy, either until you die or until payments are no longer required (usually at 90 years of age or 30 years from when you took out the policy).
Can be Written into Trust
Over-50s life insurance can be written into Trust. This means the payout may not be legible to inheritance tax, saving your beneficiaries inheritance tax payments.
Terminal Illness Benefit
Some over-50s cover can payout upon diagnosis of a terminal illness, rather than upon death.
Who Does Over-50s Life Insurance Benefit?
If you’re fighting fit at 50 with a clean bill of health, then over-50s cover will be of much lower value compared to someone with serious health conditions. For those with serious health problems that likely jeopardise life expectancy, over-50s life insurance is much better value.
Put simply, if you do not expect to live for very long, then you will get the best value out of an over-50s policy.
The Downsides of Over-50s Life Insurance
Since insurers are not asking for medical information, they are taking more significant risks. That risk passes on to you in the form of smaller payouts and higher costs. Like other forms of life insurance, over-50s life insurance is essentially a gamble for both you and the insurer. For the insurer, they stand to lose out if you take out life insurance and die shortly after. On the flip side of the coin, you stand to lose out if you live beyond your final payment date.
To help provide better value, most insurers will stop requiring payments once you pass your 90th birthday. By this point, inflation will mean your payout falls below the cost of the premiums anyway. Some insurers, however, will require you to pay until you die, and if you are lucky enough to live beyond 90 or even 100, then you might wish you never bothered with over-50s life insurance!
Over-50s life insurance is usually marketed on the basis that it is cheap and available to all over-50s, regardless of health or financial status. That is true, but the value of over-50s policies depends on how long you’ll be paying, and they invariably benefit some more than others.