Many people take out life insurance so that a lump sum can be used to pay off a mortgage, or settle outstanding debts, when they die. But if you were to take out life insurance at 50, you’d find the premiums much more expensive than if you were 30 – and it’s likely that you’d see some restrictions on the term of your cover.
Furthermore, term life insurance isn’t best suited to everyone. If you’re over 50 and have paid off your mortgage or have children who are grown up, your needs will be very different to a 35-year-old who has a young family and 20 years of mortgage payments to make. This is where over-50s life insurance comes in.
What is over-50s life insurance?
Over-50s life insurance is a type of life insurance for anyone aged over 50. You pay for this kind of life insurance with regular monthly instalments and when you die, it pays out a lump sum. The money could be used towards your funeral costs, to pay off any existing debts or simply as a gift to leave your loved ones.
Many of the big insurers offer over-50s life insurance, which pays out a cash sum when you die. The big advantage of an over-50s policy is that acceptance is guaranteed. You don't have to answer any health questions or pass any medical test.
This means that if you’re between the ages of 50 and 80, or sometimes 85 depending on the policy, you will not be turned down.
Another advantage of life insurance for the over-50s is that the premiums are usually fixed. This means you can choose a premium that suits your budget and desired level of cover and it will generally stay the same price. There are premiums to suit most budgets, with monthly payments starting from around £10 and going up to about £50.
But you can't miss a payment
When you take out over-50s life insurance, you must keep up the monthly payments otherwise your cover will lapse. This means that if you miss a payment, you’ll no longer be covered and you won’t get any of the money back that you’ve paid in.
Fixed pay outs
The majority of over-50s life insurance policies pay out a fixed amount, the maximum typically being around £25,000. The great thing about a fixed payout is the certainty it offers, but there are downsides too.
You could pay in more than you'll receive
It’s possible that you may pay more into your policy than you receive. If, for example, you took out an over-50s life insurance policy at 50 and paid £25 a month for £10,000 of cover, you’d have paid more in than you could receive if you live past 83.
Inflation may erode your life insurance payout
The other disadvantage of a fixed payout is that the amount could potentially be eroded by inflation. The lump sum may seem a lot when you sign up for the policy, but will it still have the same financial significance 20 or 30 years down the line?
It’s important to think carefully about your budget when deciding on a premium, as you could potentially be paying out for more than 30 years. Most insurers, however, offer free cover if you live over a certain age (usually 90). This would mean that when you get to that age, you can stop paying your premiums but your policy would remain in force.
Increasing life insurance
There are a few insurers that offer increasing life insurance for over-50s, where the sum insured, and the premiums, are reviewed every year in line with inflation. This type of life insurance holds its value over time, which is a great benefit. However, there is added risk as you will need to be confident that you can keep up with the increased payments over the years, otherwise the cover will lapse.
With funeral expenses often being a significant source of stress for the bereaved, some people want to make sure the cost of their funeral is covered when the time eventually comes. If this is a particular concern of yours, you may want to look into your potential insurer’s funeral benefits options.
Funeral benefits could involve receiving a bigger payout, or a discount from a funeral company. Every policy will differ, so it’s important to check the details, but a good example of a funeral benefit would be an extra 10% of your payout, or a £250 discount on the funeral.
Insurers almost always insist that you have paid into an over-50s life plan for a minimum period of up to one or two years before you can expect the full payout.
If you die before the minimum period, your beneficiaries will typically receive a sum equivalent to the premiums you have paid up to that point. If, however, you die as a result of an accident in the early stages of the plan, you would normally receive the payout in full.
Over-50s life insurance is not a savings scheme or an investment plan. It has no cash-in value, so if you don’t keep up with the premiums it’s worthless. It’s therefore extremely important to be sure that you can cope with the financial commitment before you sign on the dotted line.
Writing the policy 'in trust'
Money received from life insurance policies don’t usually attract income or capital gains tax, but your beneficiaries could be liable for inheritance tax at 40% on the proceeds of your life policy. This would mean the amount awarded would be significantly less than you intended.
To sidestep inheritance tax, you can write your policy ‘in trust’, so you should ask your insurer or financial adviser about how to go about this.
Find the best over-50s life insurance cover
One way to find the best over-50s life insurance cover is to compare quotes. We’ve partnered with Assured Futures to help you compare over-50s life insurance quotes from eight providers.
When you run a quote, you’ll go to a special page on their website that asks how much you want to spend or how much cover you want. Once you’ve filled in some details, you’ll be able to review quotes – and the process takes less than a minute.
When you compare over-50s life insurance, you’ll automatically be shown the cover with the lowest premiums at the top of the list. The results table clearly shows how much the policy will pay out, what age you can receive free cover and how long you have to wait before you claim.
You can also see which over-50s life insurance providers offer additional benefits, such as flexible payments, funeral benefits, or serious illness cover.
How does this work?
Moneysupermarket has teamed up with Assured Futures, who offers an external over 50 life insurance comparison service. Assured Futures Limited is Authorised and Regulated by the Financial Conduct Authority (FCA reference 176392)