Over-50s life insurance plans. Most of us have heard of them and the understanding is, they are one way of ensuring family members have some financial support when you pass away.
An over-50’s plan (should) ensure a pot of money is left to family members when you die. This can be used to help pay for costs such as your funeral.
Forget the ‘free fountain pen’, or the soothing tones of Michael Parkinson’s voice telling you how ‘simple’ it all is…
Over 50’s Life Insurance plans aren’t always as simple as they are made out to be. Are they any better than a standard insurance policy and will they pay out more than you pay in?
We explore…
What are ‘over-50 plans’?
Over-50 Insurance or ‘Over 50 Life Plans’ can be taken out by people between 50 and 85.
The plan will then pay out a sum of money to family members upon your death.
Unlike traditional life insurance policies, the cover is not offered based on your health; you don’t you need a medical; anyone can get a plan.
These types of plans are ‘sold’ for their simplicity and for those who aim to help family members with immediate costs, such as a funeral. They may also serve to provide a small financial cushion so that family members are looked after, too.
A fixed lump sum (pay-out) is (typically) promised when you die, removing any investment risk and you always know what your family will get.
You can usually purchase a plan for a small, monthly amount. How much they pay-out will depend on the age when you took out the plan.
Things to consider…the pros and cons
PRO: Let’s start with a positive (well kind of). You don’t need a medical to get an over-50s’ plan; unlike traditional life insurance policies. However healthy, or unhealthy, you’ll still be able to get a policy, which when you die will pay out a sum of money to your family members.
Traditional life insurance policies get more expensive the older you get. This is because of your increased risk of dying, so the premium needs to reflect this.
That said, whilst it may seem positive in one breath, it is important to note it’s a ‘one-size-fits-all’. If you’re very fit and healthy despite your increasing age number, it may not be the best option, as the over-50 plans are designed to pay out to those in ‘poor health’ too.
CON: Some Over-50s’ plans you need to keep paying until you die. Meaning there are no breaks, and in order to receive your (fixed) ‘lump sum’, you must keep paying.
Sound reasonable? Yet the lump sum paid out is fixed! This means: the longer you live, the more you pay, while the amount paid back remains static. You could end up paying in more money than any plan will ever pay out.
Example: when you will have paid in more than it will pay out!
Martin Lewis provides a great example of this below in a piece he wrote on Over-50s’ Plans:
These days, insurers can’t discriminate based on gender, so let’s call our example Bob – short for Robert or Roberta. (S)he’s a 65-year-old in decent health who loves dancing and spending time with the family and who decides to put £5 a month aside in Axa’s over-50s’ plan. It promises to pay out a lump sum of £750 on death.
Divide the pay-out (£750) by the monthly cost (£5) to get 150 months; that’s over 12 years. So, by the time Bob’s birthday cake has 77 candles on, the amount paid in will be exactly the same as the policy promises to pay out.
Therefore if (s)he carries on paying past this age, Bob will be making a loss.
Alternatives to Over-50 Plans
Save: It may sound obvious, but this one really is simple; put money aside each month into a savings account. Whilst interest rates may be low now, they may increase over 20-30 years’ time (we hope).
Banks will usually release money early from an estate to pay for funeral costs if friends or relatives can provide a copy of the death certificate and an itemised account from a funeral director.
A helpful tool can be found on The Office for National Statistics, which will provide you with a statistical average of your life expectancy. You can enter your gender and current age and it will provide you with an average. This is a good way to do some simple arithmetic about how much you could save over ‘x’ time if you put ‘£x’ away.
As little as £5 a month can make a difference over time. Then there’s other financial options such as ISA’s, Stocks & Shares ISA’s or specific savings accounts. Speak to your bank or financial advisor for more info!
Traditional Life Insurance Policy: As we mentioned earlier, these can be more expensive, but typically pay out larger sums of money to look after your family when you have passed. Be prepared for medical questions or premiums to alter depending on your state of health.
Funeral Plan: If your main concern is the payment of your funeral, then a specific funeral plan may be the option for you. We have covered much of the debate around funeral plans in our blog, with useful articles for your information!
These plans typically work with you pre-paying for your funeral, either in instalments or a lump sum, so when you die everything is taken care of and the amount you pay depends on what is included within the plan.
What are ‘over-50 plans’?
Over-50 Insurance or ‘Over 50 Life Plans’ can be taken out by people between 50 and 85.
The plan will then pay out a sum of money to family members upon your death.
Unlike traditional life insurance policies, the cover is not offered based on your health; you don’t you need a medical; anyone can get a plan.
Are there alternatives to Over-50 Plans?
Save: It may sound obvious, but this one really is simple; put money aside each month into a savings account. Whilst interest rates may be low now, they may increase over 20-30 years’ time (we hope).
Traditional Life Insurance Policy: As we mentioned earlier, these can be more expensive, but typically pay out larger sums of money to look after your family when you have passed. Be prepared for medical questions or premiums to alter depending on your state of health.
Funeral Plan: If your main concern is the payment of your funeral, then a specific funeral plan may be the option for you. We have covered much of the debate around funeral plans in our blog, with useful articles for your information!
These plans typically work with you pre-paying for your funeral, either in instalments or a lump sum, so when you die everything is taken care of and the amount you pay depends on what is included within the plan.