The over 50 life insurance market is very competitive, and sometimes it can be difficult to know which policy is best for your situation.
Over 50s Life Insurance is different from traditional term insurance or whole of life cover as financial liabilities and obligations tend to change in our later years. What should you expect from an over 50 life insurance policy?
Many people look towards over 50 life insurance as a means of covering funeral costs or other financial expenses in later life. Those over 50 tend not to look towards term insurance and more towards whole of life cover with terminal illness insurance.
As you might expect, there are many frequently asked questions about life insurance for those over 50 which we have covered below.
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As soon as your application has been processed, then your cover should start with policy documents to follow by post/email. While the broad details of your insurance cover should be explained during the application process, the documents will go into great detail about the extent of your cover. If you have any questions, simply call the insurer, and they will be able to help you.
If you take out life insurance in your 50s, then there is every chance you could be paying premiums up to 90 when premiums cease, but cover continues. However, many people fail to take into account the impact of inflation, especially over a prolonged period of time. Let’s say, for example; you wanted to take out life insurance of £50,000 to ensure that your partner was supported in the event of your death.
If we went with a modest 3% inflation per annum then over a ten year period the effect relative spending power of the £50,000 would reduce to just £36,871. If this ongoing 3% reduction in relative spending power was to continue for a further 10, 20 or 30 years, you begin to get the idea.
There may well be financial constraints, but if you can afford to increase your premiums in line with the rate of inflation, then this may prove beneficial in the long-term. There are some policies which will automatically increase by inflation both in terms of premiums and payouts.
In recent years we have seen average life expectancy in the UK increase which, together with advances in medical technology means that we are expected to live longer. Therefore, in theory, we should see a softening of life insurance premiums if life expectancy continues to increase. This is because the average person would pay in more premiums in the future, than they would have in the past, up until the average age of death.
It is also worth noting that your life insurance premiums will also be impacted by your postcode, the so-called “postcode lottery”. So while the average UK life expectancy may be improving, this does not mean that improvements will be seen across the board.
In theory, if you can afford the premiums for a particular level of cover for an over 50s life insurance policy, then your insurance company will likely provide that cover. While life insurance policies aimed at those aged over 50 tend to be all of the life cover you could, in theory, take out defined term life insurance.
Even though it is obviously important to maintain sufficient cover to support loved ones in the event of your death, there is a balance between affordability and excessive cover.
One of the main attractions for those looking at over 50 life insurance is the fact the majority of insurers do not request you take a medical. This type of cover will already take into account common medical conditions and life expectancy for particular age brackets.
The application process will involve a request for details of any existing medical conditions which may impact an insurer’s ability to offer life cover. In the event of existing medical conditions, the insurer may decide to exclude these from a potential policy but still provide a degree of life cover.
It is very important to disclose any pre-existing medical conditions as failure to do so could invalidate your cover and lead to the policy being terminated.
Over 50 life insurance is to all intents and purposes a type of whole of life cover. Basically, you will have life cover at a prearranged level while premiums are paid. Some insurance companies will stop taking premiums when you reach 90 years of age but still provide life cover.
The moment that you stop paying your premiums, prior to turning 90, your cover would be cancelled and the policy terminated.
It is not normally possible to take out joint over 50 life insurance, but that does not stop you from taking out two individual policies. If each policyholder named the other as their beneficiary, then taking out two individual policies ensures the surviving individual has some degree of financial support.
Under normal circumstances, a life insurance payout would not attract income tax or capital gains tax. As long as the policy was “written in trust” this would also ensure there were no inheritance tax obligations.
The situation can be a little more complicated in the event of beneficial trusts and other tax-related structures. In this instance, it may be sensible to take financial advice in order to confirm any potential financial liabilities.
While it will differ from insurer to insurer, you should be able to take out more than one over 50 insurance policy. However, there may be restrictions as to the potential combined payout.
As a consequence, this is perhaps a question you should ask when considering which insurance company to use. It can be a useful option if you find yourself needing additional cover later in life.
The majority of insurance companies in the UK offering over 50 life cover will stop taking premiums when you reach 90 years of age. Your life cover and terminal illness cover will still continue, but your premiums will stop.
Whether you are making a claim for terminal illness insurance or your beneficiary is claiming payment on death, you should contact the insurance company with policy details. They will be able to confirm the paperwork required and the timescale for settlement of individual claims.
As those claiming payments would likely have been impacted financially by the death of the policyholder, the payment process tends to be relatively quick.
The over 50 life insurance market actually provides life cover for those aged between 50 and 80. It is also worth noting that premiums will be higher the older the applicant, although on reaching 90 years of age no further premiums would be required, although cover would continue.
The level of premiums and level of cover available will depend to a great extent on your age and whether you’re a non-smoker. Typically premiums start from under £10 a month up to £75 a month and are also dependent on the level of cover you require.
While many people over 50 will have paid off their mortgage and have limited financial liabilities, this is not always the case. The applicant may wish to provide funds for their funeral or indeed a level of financial assistance for dependents left behind.
There really is no hard and fast rule as to why you would look to take out over 50 life insurance - aside from the peace of mind it offers in many different scenarios.
The over 50s life insurance market is extremely competitive, and there are various options available today. Some companies will focus on individuals with pre-existing medical conditions, while others will offer a more general approach to life insurance.
It is important to not only take financial advice before taking out life insurance but also to consider life insurance in tandem with your overall financial situation. Unfortunately, many people seem to differentiate between life insurance and their assets, finances and debts when they should be looked at as one.
You may have various tax issues to consider with inheritance tax one of the more prominent challenges as we get older.
An over 50 insurance policy is not a savings plan, as some people believe, and therefore there is no option to cash in your policy. The value of such policies will only be realised upon death or those requesting a terminal illness payment.
This is an area of the life insurance market which is slightly different from general life insurance. As a consequence, it may be sensible to take advice when considering life cover in your later years.
Here at Money Savings Advice, we have partnered with some of the UK’s leading Life Insurance brokers. They have already helped thousands of people get the best Life Insurance cover and they can do the same for you.
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