The Pros and Cons of Over 50s Life Insurance

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What is over 50s life insurance?

How does over 50s cover work?

The pros and cons of over 50s plans

Other things to look out for

Help from Quick Quote Protect

There are different types of life insurance policies on the market, but one thing that almost all of them have in common is a light obsession with your personal health.

Of course, they do – after all, your health is a good indicator of how long you might live, and any insurance company is going to want as much information they can get about your life expectancy when they are providing large sums of financial cover for that very thing.

For many people, however, poor health is one of the reasons that they consider life insurance, especially if they are over 50, where the question of how loved ones are going to fund things such as funeral expenses becomes a worry. It becomes a catch 22 situation – you want life insurance because you are aware of your mortality, but your health is preventing you from getting affordable insurance.

If only there was a type of life insurance that took this into account…

What is over 50s life insurance?

Specialised over 50s life insurance is similar to a whole of life policy but comes with no medical checks and your acceptance is guaranteed. Simply put, it is cover for people over 50 and it doesn’t ask any awkward questions.

How does over 50s life insurance work?

The first thing to understand is that all over 50s policies are whole of life policies – this means they are guaranteed to pay out when you die, no matter when that is. Many other life insurance options are term-based, meaning that they eventually run out, but that’s not the case with a whole of life policy.

Because the payout is guaranteed, the insurance providers can work out a premium that doesn’t need a complicated understanding of your medical status. They simply use your age and work off a lot of statistics to determine the size of your premiums.

The pros and cons of over 50s plans

There are many benefits of an over 50s policy, but are there any disadvantages? Of course, like all things, there are many things to consider when choosing your life insurance, but for many mature people, the over 50s plan cons are minor compared to the many advantages of over 50s cover.

Benefit #1 – The guaranteed acceptance rule

You will be eligible as long as you are over 50 – no one is turned away.

This can be a huge relief for many, especially those who have shopped around for life insurance only to find their medical history puts many policies out of reach. There will be no awkward questions, and you won’t find your request for life insurance rejected.

Possible drawback #1 – The waiting period

The insurance company is taking a large risk offering no-questions-asked life insurance policies to everyone over 50, so to lower this risk somewhat, they require a waiting period (also known as deferment period) which is usually set to one or two years. During this time, the policy will not pay out the full sum if you pass away – instead, it will pay out an amount that’s equal to the total cost of premiums you have paid so far.

There’s no loss to you, as the worst that can happen is they return the money you put in, making it little more than a very basic savings account for the first year or two, but it’s important to understand that they won’t provide the full sum assured.

As soon as the waiting period is over, however, the policy will pay out in full in the event of your death.

Benefit #2 – It’s like a whole of life policy

Being very similar to a whole of life policy, your over 50s cover will last until you die, whether that’s at 65 or 125. Plus, many policies have a cut-off point for paying in (typically at 80 or 85 years), after which they won’t ask you for any more money, but you’ll remain covered for the rest of your life – no matter how long that is.

Possible drawback #2 – The size of over 50s cover

Because it is guaranteed to pay out, whole of life insurance, including even the best 50s life insurance, is typically smaller than other types of life cover.

It is assumed that you do not need cover to provide security for your family once you reach your later years in life, but you are just looking for an amount to make sure no one is left out-of-pocket with funeral expenses or other costs that come about after your passing.

An over 50s policy is unlikely to be suitable for large inheritance amounts or to clear a significant debt such as a mortgage.

Benefit #3 – Affordable premiums

Because the final sum assured on an over 50s policy is relatively low, this is reflected in the cost of cover. If you are looking to provide insurance to make sure that none of your loved ones are left footing an unexpected bill for your funeral costs, then you may find cover available for just a few pounds each month.

Possible drawback #3 – You could end up paying more than your payout

Whilst the premiums for an over 50s policy are competitive, it is possible that if you live a long life, you could end up paying as much or more into the policy than the lump sum paid out when you pass away.

Some over 50s providers expect you to continue paying your premiums until death, but the providers we work with at Quick Quote Protect stop taking premiums when the policyholder turns 90. While the premiums stop being paid at 90, the cover remains in place until the policyholder dies, no matter what age that happens, and the policy will still pay out the full lump sum to the beneficiaries on death.

Having a policy that stops taking premiums later in life limits the risk to the policyholder, as they don't have to continue paying more and more into a policy for the same payout, which should be a consideration when taking out this type of policy.

Other things to look out for with your over 50s life cover

Inflation

As the years pass, money becomes worth a little less due to inflation. Year by year, it is hard to see much of a difference but over ten years, or twenty, the change is staggering. A policy for £5,000 today is going to be worth a lot less after two decades have passed.

Consider index-linking your life insurance policy to protect yourself from the effects of inflation.

Life insurance is not a savings account or investment

It is easy to confuse a life insurance policy with a life savings or investment portfolio, but it is neither. Life insurance provides you with a known payout in the event of your death, but it cannot otherwise be drawn out.

It is possible that over the years you may pay more into the life insurance policy than it will pay out and any extra money is lost, however, it is also possible that your death occurs sooner than expected and the insurance policy will still pay out in full in this unfortunate event.

If you find yourself wanting to cancel your policy, you will not be eligible for any sort of refund or return of money paid so far.

You cannot miss a payment

Like all life insurance, if you fail to pay the monthly premium then your life insurance will become invalidated and making a claim on it will be impossible. It is important that you prioritise your regular life insurance payment to avoid any unfortunate mistakes.

Should you find yourself having a period where you were unable to make payments, contact your insurer and explain the situation with them – they may be able to arrange a payment holiday for you while you get your finances back on their feet.

Additionally, should your life insurance become cancelled due to non-payment, don’t despair – call back and get a new policy put in place.

Help from Quick Quote Protect

At Quick Quote Protect we have a team of specialist advisors who are experts in all aspects of life insurance. If you have any questions, or for help in getting the best over 50s life insurance policy, give us a call or fill in our contact form today.