Over-50s life insurance: What options are available and how do you get a good deal?

Many people aged fiftysomething and over don’t have life insurance. Vicky Shaw finds out if that’s something we should all be worried about.

Life insurance can provide vital cash for your family just when they need it most – if you die or are diagnosed with a critical illness.

But it’s a type of cover that is often overlooked by those it could help – perhaps because it’s not always obvious what type of cover could be the most suitable, or it may be something people put off until it’s too late.

Just over a third (36%) of over-55s say they currently have a life insurance policy, MoneySuperMarket recently found. And research from Co-op Insurance has suggested many people would put buying cover for their possessions ahead of insuring their own lives.

Charles Offord, director of Co-op Insurance says: “Life insurance is often seen as the least important policy to take out. But, if you want to ensure that you leave your family something, it’s important to understand how life insurance works, and the different policies on offer.”

How can life insurance help?

Life insurance can help to safeguard your loved ones from difficult financial circumstances, particularly as people get older and may be diagnosed with certain illnesses.

Payments can be put towards funeral costs, living expenses or clearing debts.

Individual policies vary – so it’s important to shop around for the best one to suit your needs – which may involve talking to a financial adviser or insurance broker, as well as checking comparison websites and contacting insurers directly.

Ben Heffer, a life and protection insight consultant at financial information business Defaqto, believes over-50s may be wise to consult a financial adviser, because “ascertaining the most appropriate options for older clients, taking into account their needs, affordability and the many options available to them, is a skilled activity”.

What type of policies are available?

Among the policies available are over-50s or ‘guaranteed acceptance’ plans, which typically don’t need medical disclosures, and have a guaranteed sum payable on death.

Heffer said generally of over-50s plans: “Many people use these policies to provide a bequest to loved ones, or more typically, to pay for their funerals. The downside is that if someone lives for many years after taking out the policy, they may end up paying in more than the eventual death benefit, but these policies are primarily about peace of mind.”

Some policies incorporate a cap – so after a certain period of time, no more premiums are required.

Heffer said there are also some ‘whole of life’ insurance policies available, which may be useful for providing larger sums – perhaps to clear debts or compensate for care costs – which is why it’s important to seek out the best deal for you.

With these policies, there may be medical questions to answer – but if people are in good health, they may prove to be cost-effective, Heffer said. If you don’t want whole of life cover, there are also policies covering a pre-agreed period.

People may also want to consider critical illness cover – which may pay out if you’re diagnosed with a heart attack, cancer or stroke, for example. Heffer said critical illness policies typically extend until age 75 to 80 – and some even to 85.

Income protection insurance can also be particularly useful for the self-employed – but policies can be more costly with increasing age, Heffer cautions.

What else should I consider when choosing a policy?

Alex Edmans, head of product at Saga Personal Finance reminds people to bear inflation in mind when choosing cover. Some plans offer escalating benefit payments – but these may carry additional costs to consider.

Finally, once you’ve decided, Rachel Springall from Moneyfacts, suggests speaking to family members to make sure everyone is happy and aware of the arrangements.

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