Death is something we don’t feel like talking about or planning, and we often write about how few families have a blanket in place should the worst happen.
Life insurance plans for those over 50 are one way to provide family members with financial support upon your death.
They ensure that a sum of money is left with family members when you die to pay for expenses such as your funeral. But are they better than a standard insurance policy and will they pay more than you pay?
We take a look at exactly how they work, weighing the pros and cons.
There are many benefits to buying a plan for those over 50, but are they better than standard life insurance?
What is a life insurance plan for those over 50?
These are plans taken out by people aged 49 to 85, which pay a sum of money to family members upon your death.
Unlike traditional life insurance, coverage is not offered based on your state of health.
A payment will be made regardless of how long after you sign up for the plan until your death, usually until a few years away.
Those who subscribe to such a plan do so to help family members with immediate costs, such as a funeral, and to provide a small financial cushion for family members to be taken care of.
What are the benefits?
The main advantage of a life insurance plan for those over 50 is that you don’t need a medical exam to get one like traditional life insurance policies do.
They are intended for people aged 49 to 85, and regardless of their health or ill health, you can always purchase a policy which, when you die, will pay a sum of money to members of your family.
Traditional life insurance policies are more expensive as you get older. This is because the risk of dying increases, so the premiums reflect that.
However, because they are available to everyone at all levels of health, those who are particularly fit and healthy may not find this unique plan to represent the best value as they are designed to pay people equally. in poor health.
How much do they cost?
One of the most common reasons people sign up for these plans is the cost. Although you can pay more, you can choose to pay in a few dollars each month.
Several large insurers offer this type of insurance, but Axa SunLife is the best known with 875,000 customers. It provides the cheapest policy at Â£ 4 per month.
However, you can choose to pay up to Â£ 74 per month, and the more you pay, the more you pay out.
For example, if you choose a plan of Â£ 5 per month from SunLife, Â£ 895 will be paid upon your death, and if you pay Â£ 25 per month, Â£ 5,815 will be paid.
It is difficult to compare the cost with traditional life insurance policies as they generally cost more but pay higher amounts.
But as a guide, a 60-year-old who takes out a policy worth Â£ 150,000 over 15 years would pay Â£ 67 per month (Â£ 159 per month if he smoked), according to LifeSearch.
You can choose to pay up to Â£ 74 per month for a package and the more you pay, the more you pay out
By comparison, if you paid Â£ 67 per month in a SunLife plan, you would get back Â£ 16,290.
While you are going to be paid a much higher amount for a traditional life insurance policy, the cost listed here is for the average person. Depending on age and health this could be much higher and if so it may be worth comparing the costs with a plan for those over 50.
What are they used for the most?
The cost of basic funerals has risen 88% over the past decade, now at Â£ 3,693, according to SunLife research, and it indicates that 59% of people are putting something aside to pay for their funeral.
Dean Lamble, Managing Director of SunLife, said: âWe think it’s important for everyone to consider making funeral arrangements because our research also shows that it can cause a lot of stress for loved ones at a difficult time if none. provision is not in place.
âThere are a number of ways in which funeral services can be provided; by saving, taking out a funeral plan or having a plan for the over 50s, which is a form of life insurance. ‘
One life insurance policy for those over 50 ensures you won’t pay more than it pays on death
What are their faults?
The main flaw with plans for people over 50 is that you could end up paying more money than a plan will ever pay.
The plans pay on death, so if someone took out a plan at age 60 with SunLife, for example, and paid Â£ 5 per month, then over 20 years they would have paid a total of Â£ 1,200 into the plan. Then, if they died at age 80, the insurer would pay Â£ 895 – but that means he would miss Â£ 305.
If the same person died at the age of 90, SunLife would still pay them Â£ 895, but would have paid Â£ 1,800 in total, an overpayment of Â£ 905.
Obviously, there is no way of knowing exactly when you will die, and the purpose of purchasing insurance is to cover yourself against unforeseen events, but in both of these cases the policyholder would have ended up paying the insurer. more than he would receive in return.
There is one exception to this rule and that is the recently launched British Seniors Over 50 Life Insurance Policy which guarantees that it will not pay less than what you paid. She’s the only one doing it, and she’ll pay. either the amount of coverage or the total premiums paid (whichever is greater).
Another alternative would be to put this money in a savings account. Rates may be low, but over 20 or 30 years the interest should have increased, unlike the pot in the scenario described above.
The main flaw with plans over 50 is that you could end up paying more money than a plan will ever pay.
If you die within two years, you may not receive the lump sum
If you were to buy a plan for those over 50 and die six months later, most plans won’t pay the lump sum.
Instead, they’ll refund the premiums you’ve paid – and sometimes a little more – so the total amount paid will be significantly less.
On top of that, premiums will often only be refunded for the first year or two if your death is accidental.
Therefore, if you are considering subscribing to any of these plans, it is worth taking a look at the fine print to make sure you know exactly how much you will need to pay and how much you can expect. to recover.
BUY INSURANCE FOR OVER 50?
Have you purchased life insurance for the over 50s and do you think it offers good value for money? I would love to hear your story.
E-mail: rebecca.rutt@ thisismoney.co.uk
Compare them with standard life insurance policies and put the same amount of money in a savings pot before continuing.
Emma Thomson, Director of Relations in the Office of Life at LifeSearch, adds, âPlans older than 50 may be a good solution for some, but they should be viewed with some caution.
âThey are marketed as an easy option, with no health issues or medical exams, and accepted by everyone.
âBut that means that for healthy people, they will definitely be of low value. And some customers might pay more in premiums than what would be paid in the event of death.
âConsumers who don’t have serious health issues should consider other options, such as standard whole life insurance plans or term insurance plans that can be purchased up to age 90. Although they involve a subscription, they will certainly offer better value for money, even for people who have some health problems â.
Alternatives to life insurance for people over 50
If you are looking for alternatives, there are three main options; a traditional life insurance policy, savings account or funeral plan.
Each of them can help relatives and friends pay for your funeral and other expenses after your death.
A traditional life insurance policy pays out a much larger sum of money, which can run up to around Â£ 150,000, leaving a large pot for your family when you die. However, as already mentioned, the prices per month are significantly higher.
The second option is to use a high interest savings account to store your money. Storing your money, whether in an ISA savings account, regular savings account, or even investing in a stock and stock ISA account or account, is another way to generate income from of your money.
This money could then be used by your family for anything they need – including covering your funeral expenses, and you have the freedom to withdraw your money earlier if you wish, but always double check the details in case. there would be a risk that you would already lose. – accrued interest.
Banks usually release money earlier from an estate to pay for funeral expenses if friends or relatives can provide a copy of the death certificate and an itemized account from a funeral director.
Finally, if it’s just your funeral you’re worried about paying for, you can always pay for it up front with a funeral plan.
These plans usually work with prepayment for your funeral, either in installments or as a lump sum. So when you die everything is taken care of and the amount you pay depends on what is included in the plan.
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