What’s the difference between life insurance and an over 50s plan? NimbleFins explains.
If you’re worried you’ve left it too late to arrange life insurance, an over 50s plan could be an option to consider. Here, we explore how over 50s life insurance works and weigh up the pros and cons.
Is an over 50s life insurance plan the same as life insurance?
Over 50s plans are a type of life insurance. When you buy a policy, you’ll pay fixed monthly premiums. In return, your beneficiaries will receive a cash payout when you pass away.
One of the main advantages of an over 50s plan is that there’s no medical and most providers promise guaranteed acceptance. In other words, it shouldn’t matter if you have a history of poor health or any pre-existing medical conditions.
It’s important to know that payouts for over 50s plans are usually lower compared to other policies. With this in mind, the amount your beneficiaries receive might not be enough to cover costs like a mortgage, but it could be enough to cover funeral expenses with a little left over.
Who can be my beneficiary?
Beneficiaries are the people who will receive money from your life insurance. It’s entirely up to you who they are, but they’ll need to be named on your policy in order to benefit.
In most cases, beneficiaries are dependents, including your spouse or long-term partner, children, stepchildren, other relatives or close friends. Beneficiaries could also be charities.
How does an over 50s life insurance plan work?
As its name suggests, you’ll need to be at least 50 years old to take out an over 50s life insurance plan. Policies will usually have an age limit, typically between 80 and 85 so if you’re older than this, you could struggle to find cover.
Most over 50s plans are whole of life policies, so once your plan starts, you’ll be covered until you pass away (as long as you keep up with your premiums).
How much does an over 50s plan pay out?
Broadly, the value of the payout will depend on the premiums you pay in, but it can also depend on other factors such as your age. For instance, the younger you are, the more your beneficiaries are likely to receive.
Depending on what your options are and what you agree with your provider, cash payouts can vary considerably. Some payouts could be as little as under £2,000 while some providers suggest payouts could be up to £18,000.
How much does over 50s life insurance cost?
Cost is often closely related to age. The older you are, the more you can expect to pay. Some over 50s life insurance plans offer premiums that start below £4 but they can go up to as much as £100 per month.
Another factor to consider is the value of the payout. Some providers will let you specify how much you want to leave your beneficiaries and then work out your premium based on this as well as your age.
How long do I need to pay premiums for?
As a rule, over 50s plans are whole of life policies so you’ll pay your fixed monthly premium for the rest of your life—so you won't have to worry about whether or not you get money back if you outlive your policy.
That said, some providers will have a maximum payment period, for example, 30 years. In this instance, once you’ve paid premiums for 30 years, you no longer have to pay them, but you’ll still be covered. Other providers may stop taking premiums when you turn 90 years old (but again, you’ll still be covered).
It’s vital to make sure you keep up with premiums unless your plan explicitly sets a limit. If you stop paying premiums, your policy will lapse, and your beneficiaries won’t receive any money.
Can I have more than one over 50s life insurance plan?
Yes, you can have more than one over 50s life insurance plan. If you buy them from different providers, you can have multiple policies but if you want to stick to one provider, you’ll need to check your policy terms carefully.
Some providers limit the number of policies you can have with them according to the total value of all your plans. For example, you could be allowed more than one as long as the value of all your plans is no more than £10,000.
Other providers may limit the number of policies you can have with them based on the value of premiums. For instance, you could have as many plans as you like as long as the value of your premiums does not exceed (say) £100 per month.
Do over 50s life insurance plans offer good value for money?
Over 50s plans have been criticised in the past for not representing good value for money. However, whether they are or not depends on your circumstances and the reasons for taking out the plan in the first place.
Important points to consider include:
The cash payout could be less than what you’ve paid in
Depending on how old you are when you take out the policy and when you die, what you pay in premiums could be more than the payout.
Inflation could mean the cash payout doesn’t go very far
If you live for a long time, the value of the cash payout could decrease significantly as the cost-of-living increases.
If the intention is for the money to cover funeral costs (for example) you’ll need to consider whether what’s left will be enough to cover these expenses.
Policies usually have a waiting period
Waiting periods are also called qualification or moratorium periods. If you pass away during this time, your policy may not pay out in full, but some providers will refund any premiums paid up until that point.
There are usually exceptions to the waiting period. For example, if you die in an accident in that time, the policy might still pay out.
As providers set their own terms, it’s worth checking what their stance is on qualification periods.
Is an over 50s life insurance plan right for me?
You’ll need to think carefully about your own circumstances and consider the benefits and drawbacks in relation to your expectations. To help you decide, here’s a quick summary:
Benefits of an over 50s life insurance plan
- Guaranteed acceptance if you’re over 50
- Cash payout to beneficiaries
- Premiums are usually fixed so unlikely to increase over time
Drawbacks of an over 50s life insurance plan
- Total value of premiums could be more than the value of the payout
- Inflation can lower the value of the payout and it may not cover intended expenses (such as funeral costs)
- If you pass away during the waiting period, there is no cash payout (but premiums may be refunded)
If you’re not quite 50, or want to explore other options, we’ve put together a guide to the different types of life insurance policy, so that you can decide what’s right for you. Or check out our article, Do I really need life insurance?