If you want some cover in your older years, it's important to choose your insurance carefully or you could end up out of pocket.
Sections
Over-50s plans
Over-50s life insurance plans are different from other types of life insurance, although they work in similar ways.
Essentially, you pay a premium each month and when you die your beneficiaries will receive a payout.
However, there is a catch with a lot of these policies, in that the payout is capped but your payments in aren’t. So, depending on how long you live, you could pay in far more than your loved ones will get out.
There are over major drawbacks with over-50s life policies that you should consider.
Here we explain whether life insurance could be suitable for you and how to get the most from it.
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Pros and cons
Applying for life insurance
If over-50s life insurance is suitable for you then it's important to make sure you get the best deal.
Shopping around is, of course, crucial – as is reading the terms and conditions in detail (and getting independent advice if you're not sure).
It's important to be honest: while over-50s don't have a medical assessment, you don't want to give the insurer an opportunity to refuse a payout on the grounds that you didn't disclose something.
Things like long holidays or business trips away, depression, drug use, stress, anxiety, moles and allergies count, so confess everything. To learn more about how insurers get out of paying read: when life insurance doesn't pay out.
You'll also need to decide whether you want a joint or single policy. A joint policy will pay out once on the first death, but two single policies is double the cover and ensures the surviving partner has protection in place for any dependents he/she may leave behind.
Finally, consider writing the policy 'in trust'.
This is free and means the payout doesn't become part of your estate and is more efficient for Inheritance Tax purposes, plus your descendants won't have to wait for your estate to be divided.
For more on passing on wealth and reducing tax, read our complete guide.
It's not the same as funeral cover
Alternatives
Over 50s life cover definitely isn't for everyone, so you might want to consider 'traditional' life insurance.
To find out more about life insurance, read our guide. You'll need to pick between level term, decreasing term, increasing term and guaranteed whole-of-life.
Level term pays out a fixed sum in the event you die during the life of the policy, otherwise known as the term. This type of cover generally expires at a certain age, such as 65 or 70, depending on who you buy it from.
Decreasing term, as the name suggests, falls in value as the term goes on, so is suitable if you only want to cover something like a repayment mortgage, which will decrease over time.
Increasing term means the amount paid out will grow, a good option to inflation-proof your policy but less useful to over-50s. Guaranteed whole-of-life plans are generally more expensive
Family income benefit plans pay out a monthly income rather than a lump sum, useful if your family wouldn't be confident managing a huge amount of money at once.
In theory, traditional life insurance would pay out more than an over-50s plan and always more than you’ve paid in. However, you may need to undergo a medical examination before you can get cover and the cost of your monthly premiums will depend on your health.
Another option would be to save and/or invest part of your income, ideally into an ISA, so there's money available should you pass away. That way your family not dependent on a life insurer to pay out.
This doesn't protect you as well against uncertainties, given it will take years for a sizeable pot to accumulate.
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