Over 50s life insurance: what is it & is it worth it?

You’d generally set up life insurance to make sure that a person who is financially dependent on you (either wholly or partly) would not be short of money if you die prematurely.

Life insurance is also invaluable if you want your mortgage paid off in the event of your death.

As you enter your 50s, you may have fewer dependants and your mortgage might be nearly cleared, but there may still be good reasons to have some forms of life insurance in place.

What is over 50s life insurance?

An over-50s life insurance policy is designed for people aged 50 to 80 (49 to 85 in some cases), to minimise the financial impact of your death on loved ones.

You pay monthly instalments and, when you die, the policy pays out a lump sum.

The money can help cover mortgages, debts, unpaid bills and funeral costs – or it can simply be a gift to your beneficiaries.

Learn more: over 70s life insurance: can you and should you get it?

How does over 50s life insurance work?

There are different types of over 50s plans.

The majority of them pay out a fixed cash lump sum when you die, regardless of how long you live.

To decide how much you’ll need, consider why you’re taking out life insurance.

Is it to provide income for children who may be young adults but still partially dependent? Is it to ensure your spouse has enough to live on?

Life insurance can also be put in place to cover your funeral expenses, ensuring that funds are immediately available for payment. This is important because the inheritance process can take time, and your estate may not be able to cover the funeral costs directly.

You can also use life insurance to cover an expected inheritance tax (IHT) bill – as this tax usually has to be paid before the probate process can end, meaning your beneficiaries will have to find the money for this.

After deciding on a lump sum, you’ll pay a monthly premium dependent on that sum. This amount is generally also fixed, so the insurance company can never increase it. For example, for a pay-out of £4,000, a 50-year-old would pay a fixed £12 to £14 a month.

Make sure it’s an amount you’re comfortable with and can afford, as you could end up paying for a long time.

Some providers offer increasing life insurance, where the premium and pay-out increase yearly. Be sure to check whether you have a fixed or increasing plan before signing.

What are the pros and cons of over 50s life insurance?

Here are some of the key pros and cons of taking out life insurance in later life.

The pros of over 50s life insurance

• Most plans offer guaranteed acceptance. If you’re between 50 and 80 years old, you’re eligible. However, the older you are, the more expensive it usually is.
• There is no medical test. Many providers don’t ask health questions or require a medical exam. If this is important to you, look for the no-medical requirement.
• Fixed pay-outs and monthly instalments are great for planning. You choose what you can afford and know exactly what you’ll get in return.
• If the pay-out is a gift, loved ones can spend it as they wish. Insurance companies don’t ask questions or impose restrictions.

The cons of over 50s life insurance

• Plans typically have a 12-month (or sometimes 24-month) waiting period after you begin to pay premiums, before they will pay out in full. If you die in the first year, the provider will only return your payments made to date. Some plans make an exception for accidental death, like car crashes, and pay out in full (or sometimes double), provided your payments are up to date.
• You can never miss a payment. If you do, cover lapses. If you die before fulfilling this missed payment, the provider won’t pay out. Like any insurance, if you quit the policy you won’t get back any of the money you paid in.
• You could end up paying more than your payout, depending on how long you live. For example, if you’ve paid £14 a month for £4,000 of cover, after 24 years, you would have paid more than you’ll get back.
• Inflation decreases your pay-out value. What seems like a lot today might not be worth as much later. Some plans offer increasing pay-outs or the option of extra policies – but it will increase your monthly instalment. If you opt for this, make sure you can still afford the premiums in a few years’ time.

Is over 50s life insurance worth it?

The value for money of over-50s life insurance depends on your specific circumstances and reasons for taking out life insurance.

Like all life insurance, it also depends greatly on chance and luck.

Over 50s plans could be worth it when:

• You have a reasonably good idea of your life expectancy: Plans pay out the same sum whether you live for 25 years or three. Most don’t require a medical, so if you have a serious condition (but aren’t likely to die within the waiting period), your beneficiaries could get more out than you pay in.
• You can comfortably afford the monthly payments: If the monthly premium isn’t significant to you, the policy can offer peace of mind.
• You know your family could use the money: In this instance, it’s worth speaking to your financial advisor about avoiding inheritance tax.

Over 50s plans might not be worth it if:

• You already have sufficient savings: If you have enough to cover debt, funeral costs or to leave to your family you may not need life insurance as well. If you’re putting aside funeral money, make sure your family can access it quickly.
• You already have a comprehensive funeral plan: Check what it covers and if there are any additional funds you’d need.
• You have put money aside with your family to cover things like funeral expenses and/or IHT.
• You’re healthy with a good life expectancy: Inflation and years of monthly premiums could then mean you make a loss, paying more than you’ll get back.
• You can’t 100% commit to it: As mentioned above, if you stop paying, the policy is worthless. There is also no option to cash in, as pay-out only happens after death.
• You have no financial dependents or debt, and plan to have a cheap funeral.

What are the different types of over 50s life insurance?

A wide range of plans exist, and some will offer benefits others don’t.

Useful terms to look out for when comparing plans include:

• Whole of life insurance: Covers you for life. When you reach age 90 (or 95), some providers will continue to cover you for free, stopping your monthly contributions. Others, however, will expect you to pay until death.
• Term insurance: Covers you until a specified age. This isn’t common in over 50s plans.
• Guaranteed life insurance: Automatic acceptance for anyone aged 50 to 80, without a medical exam. Some insurance providers might want your smoking status.
• Fixed life insurance: Monthly premiums and pay-outs remain unchanged for the full policy term. Some plans offer flexible payments, allowing you to reduce the premium and pay-out (above a certain minimum) if finances tighten. Some also offer payment holidays for up to six months, which you’ll need to make up later.
• Increasing life insurance: The monthly premiums and pay-out increase yearly to combat inflation.

How can I get the best deal on over 50s life insurance?

If you’re feeling closer to a decision, remember that cheaper isn’t always better.

If you go ahead:

• Speak to a financial adviser or broker who specialises in life insurance. They can almost always find you a cheaper or more suitable deal.
• With your adviser, compare quotes from multiple providers.
• Choose only what you can afford and commit to.
• Always read the small print (another reason to use an adviser, as they’ll explain all the pros and cons).

FAQs about life insurance

Will I need to undergo a medical examination?

This is rare in over 50s plans. However, if they require medical information, you’ll be asked lifestyle questions (e.g. how often you exercise), your smoking status, and if you have pre-existing conditions.

Based on your answers and level of cover, they’ll decide whether you need a medical.

Are over 50s life insurance policies with a free gift worth it?

Gifts are incentives for sign-up. View them as an added bonus, rather than the main reason you select a provider.

It’s good practice to ignore such distractions and focus solely on the costs and benefits of each plan. But if two plans are equal and one comes with a teddy bear, why not.

When will I stop making premium payments?

Most plans offer free cover once you turn 90. Others require payment until you die, so make sure these are taken care of if you should lose the ability to manage your own financial affairs.

Find out about setting up Power of Attorney.

Can I cancel my life insurance?

You can cancel a policy at any time, but you’ll lose all your premiums paid to date.

If it’s within 30 days of starting the policy, you’re often entitled to a full refund, but after that you won’t be.

Get expert financial advice

Over 50s life insurance can offer you valuable financial security and peace of mind, especially if you wish to cover funeral costs or provide a financial cushion for your loved ones.

While it provides guaranteed acceptance and fixed premiums, it’s essential to weigh the pros and cons carefully and consider factors such as potential waiting periods, inflation, and your overall financial situation.

For those who can afford the premiums and see a clear benefit in their personal circumstances, it can be a worthwhile investment. However, it’s always prudent to consult with a financial adviser to ensure that this type of policy aligns with your long-term goals and provides the best value for your money.

Unbiased will match you with an insurance adviser or financial adviser for expert financial advice to help you navigate the specifics of over 50s life insurance, and ensure you find the right policy for your financial goals and family needs.