In 2019, thankfully people are now living longer than ever before.
Whilst this is welcomed news, what it does mean is that the vast majority of us need to financially provision for a longer life.
A popular and affordable way of securing both your and your loved one’s financial future is to take out life insurance.
Common reasons to take our life insurance in later life include to:
- Cover the cost of a funeral, (average cost £4,271)
- Leave an inheritance to loved ones
- Pay off a mortgage
- Clear any outstanding debts
It’s Not Just About Your Age
Generally speaking, the older you are when you take out life insurance, the higher your monthly premiums will be.
However, you may be surprised to learn that age is not always the most influential factor when taking out cover in later life.
Whether or not your application is accepted, and the cost of your premium is calculated based on the level of risk you pose.
Statistically, those in the later stages of life are more likely to have suffered a medical ailment, putting them in the higher risk category.
And it is this that causes our older population to be charged more for cover and not solely their age.
As a result, those in excellent health could be pleasantly surprised by the affordability of their monthly premium.
But what are your options and which policy type best meets your needs?
Traditional Term-Based Life Insurance
If you are only just entering your senior years, term-based life insurance could still be a valid option.
However, as you age, the policy term length offered by the insurer, and the accompanying premium price often mean this is not a cost-effective option.
The older you get, the more likely you are to make a claim; therefore, insurers mitigate this risk either by limiting the term length or demanding higher premiums.
Term based cover, as the name suggests, only provides cover for a specified period of time. If you do not pass away during this set timeframe, the policy simply expires with no pay out materialising.
This policy type is often used by the younger demographic to protect a mortgage. The policy term is set to mirror that of the mortgage term.
Often in later life, to cover expenses such as spiralling funeral costs, people want a guaranteed pay out which term-based cover does not provide.
Over 50s Plans
A very popular way of securing cover in later life is through a guaranteed over 50s plan.
Why are they so popular?
Largely because you are guaranteed acceptance if a UK resident and aged between 50 – 80, without the need to undergo a medical or even answer any medical questions.
If you have had health issues in the past this is obviously a very good option, as it will not hinder your chances of obtaining cover.
However, it is important to mention that these policies come with a 12 or 24-month qualifying period. (Sometimes known as the waiting period).
This is a period of time at the start of the policy in which you cannot claim, (although the premiums you have paid in would be returned).
These policies last for the rest of your life and therefore, assure your loved ones a pay out at some point.
As a result, over 50 plans are a form of life assurance.
This is in contrast to life insurance which only pays out if you pass away during the policy term.
Whole of Life Insurance
Like over 50 plans, whole of life policies are a form of life assurance, as they to guarantee a payout.
However, there are some fundamental differences between the two policy types.
Most significantly whole of life insurance applicants are asked health related questions during the application process and may need to undergo a medical exam.
If you are in your 50s or early 60s and in excellent health this could be a great opportunity to prove to the insurer you are lower risk.
What’s more, if you are in good health you should be able to secure a greater cover amount for a more reasonably priced premium compared with an over 50s plan.
This is because over 50 plans tend to enforce slightly inflated premiums to protect against their unknown risk, (as no medical questions are asked).
On the flipside if you have experienced health problems in the past you will probably find it hard to even be accepted for a whole of life policy.
The Chance of Losing Money
With both over 50 plans and whole of life policies it is possible to pay more into the policy than it will ever pay out.
This is because we simply do not know how long we are going to live; thus it is possible for the premiums you pay in to exceed the sum assured.
Over 50 plans may offer a slight advantage in this respect though.
While whole of life policies require you to pay premiums for the rest of your life, some over 50s plans allow you to stop paying premiums when you reach a certain age, (commonly 85 or 90 years).
What About Funeral Plans?
In later life often the primary purpose for wanting policy protection is to cover the cost of your funeral.
According to research from leading insurer SunLife, the average cost of a UK funeral is now £4,271 and this figure is predicted to continue rising.
If your funeral is the sole purpose for the cover you may find yourself benefitting more from a prepaid funeral plan.
Life insurance as we get older can become pretty expensive, whereas a funeral plan offers a fixed cost regardless of your age.
It also allows you to pay for the cost of your funeral at today’s rate, avoiding the inevitable future price increases.
It is important to state here that most funeral plans do not cover all the 3rd party costs, such as minister fees, cremation fees and doctors’ fees.
Whether a funeral plan makes sense for you will depend on what it is you want to protect.
If the answer is just funeral costs, then this could be a great option for you.
However, if you have additional costs you want to cover then it will not be suitable.
You are Never Too Old
As you age, your need for life insurance continues to evolve.
When you are in your 20’s or 30’s you will probably want to protect the living costs for your young family or perhaps cover a mortgage debt.
But, when you reach your 50s, 60s or 70s you may have retired, paid off your mortgage and your children are probably financially independent. So, your priorities change.
Instead you may want to cover funeral costs and/or provide an inheritance to loved ones.
With such a wide array of policies available, there is a suitable option for you.
However, the cost of your premiums can vary wildly between insurers. Therefore, to secure the right policy at the very best price it is vital to compare quotes.
You could use a comparison website, research different insurers yourself online or alternatively use an FCA registered life insurance broker.
The most important thing is to not place a financial burden on your loved ones after you are gone.
So why not be proactive, secure your cover protection and get on with enjoying life; safe in the knowledge that everything is taken care of, whatever the future may hold.