What is over 50s life insurance?
Just as the name says, over 50s life insurance is whole of life insurance (a policy which pays out an assured cash benefit) whenever you die and may be taken out by anyone over the age of 50.
Does that mean anyone over the age of 50?
Yes, it does. One of the principal attractions of over 50s life insurance is that acceptance is automatic, whether you are a smoker or have made other such lifestyle choices, without the need for the type of medical needed for many regular life insurance policies.
Indeed, the BBC’s Watchdog programme has quoted the Association of British Insurers (ABI), which points out that over 50s life insurance provides “certainty of cover, with no questions asked”.
What’s the purpose?
The cash settlement when you die is paid out to your designated beneficiaries, who may use it to meet whatever financial need they choose – as part of the legacy you leave to them.
However, over 50s life insurance is often taken out by individuals wanting some assurance that the settlement may be used to meet at least part of their funeral expenses.
If this is your express wish for the use of such funds, of course, the majority of grieving relatives are likely to see that this is the case and use the death benefit accordingly.
How much are the premiums?
The amount you pay in premiums of course determines the size of the eventual cash settlement upon your death – so the choice is very much yours to make, although different providers of course compete in an attempt to offer good value for money when comparing the price of premiums and the assured cash benefit.
A particular attraction with over 50s life insurance – when compared with other ways of preparing for your funeral expenses, such as prepaid funeral plans, for example – is that over 50s life insurance policies may cost little more than just £4 a month.
How often do I need to pay the premiums?
Premiums are payable monthly, for the remainder of your life (or, with some insurers, until you reach the age of 90) – so it is important to recognise that you are taking on what might prove to be a very long-term commitment.
If you are no longer able to afford the monthly premiums, the policy automatically lapses and if you choose to cancel it, there is no cash-in value for the policy.
Are the policies inflation-proof?
The amount of the final cash benefit is decided at the very start of the policy and this determines the price of the premiums you pay, which are at a fixed amount for every month for the duration of the whole of life policy.
The effects of inflation over the years, therefore, may reduce the real value of the cash settlement when it is eventually paid – leaving any shortfall in the bill for your funeral expenses needing to be met by your family and loved ones.
Is the final cash settlement equal to the amount I paid in premiums?
That depends, of course, how many premiums you have paid over the full term of your over 50s life insurance policy.
Although insurers report that the majority of their customers have paid in less than the amount paid out in death benefit, the possibility remains that you might in fact have paid more in premiums than the amount of the final cash settlement.