Over 50 plans – 5 Top Tips 2020

As a result of the global Covid-19 pandemic life has rarely felt quite so fragile. It has led to an increase in life insurance applications amongst the over 50s in the UK.

The most common form of over 50s life insurance is an over 50s plan.

The key benefits of a dedicated over 50 plan are:

• Acceptance is guaranteed if aged 50-80 (and a UK resident)
• A pay out is guaranteed (assuming you keep up with your premiums)
• No medical questions asked on application

Whilst an over 50s plan is usually a very good idea to cover aspects like rising funeral costs or leaving an inheritance, there are a number of factors to consider to ensure your loved ones benefit fully from your selfless investment.

We asked FCA registered, award-winning life insurance broker, Reassured, to give us their 5 top tips when considering over 50 life insurance.

1. The waiting period (12 or 24 months)

Over 50 plans come with something called a waiting period, sometimes referred to as a qualifying period.

This is a period of time at the beginning of the policy in which your loved ones are unable to make a claim if you pass away of natural causes.

The length of the waiting period varies between insurers, although it is usually either 12 or 24 months.

Depending on other key aspects such as the cost of your monthly premium and the cover amount, generally speaking the shorter the waiting period the better as it increases the chance of a successful claim.

It is important to say that if you do pass away within the waiting period, the premiums you have paid in will be returned to your beneficiaries, so no investment will be wasted.

What’s more, if you pass away within the waiting period as a result of an accident, most policies will pay out the full sum assumed, (this is known as an accidental death benefit).

2. Consider writing your policy in trust

You may be surprised to learn that writing your life insurance in trust could save you £1,000s in inheritance tax. Despite this only around 6% of policyholders take advantage of this free option.

Generally speaking, the proceeds from a life insurance policy form part of your estate, which includes your property, any assets, possessions, savings etc.

The inheritance tax threshold is currently £325,000, after which you will be taxed at 40%.

Whilst this threshold figure may seem high, it is important to factor in things like rising property prices. Think how prices have changed over the last 20 years, especially in certain areas of the country. As a result, it is important to think ahead when arranging your cover.

When you write your policy in trust the proceeds avoid forming part of your estate and are therefore not subject to inheritance tax.

Also, your loved ones will not have to wait for probate to be granted, so they can expect a much faster pay out.

It is important to choose your trustee carefully however, as you are effectively signing over the policy for them to administer, much like the executor of a will.

All major insurers offer you the option of writing your policy in trust free of charge and it is just a case of filling out the necessary application.

At Reassured, our dedicated customer services team are able to run you through the application (again free of charge), answering any questions you have.

3. Free welcome gifts

Most specialist over 50s insurers, such as SunLife and British Seniors, offer a free welcome gift. This acts as an incentive for you to purchase your policy directly through them and can be a great bonus.

However, when you consider a policy can last for 25 or more years, paying unnecessarily high monthly premiums over this period could easily dwarf the value of a £100 Amazon voucher. As a result, it is essential to ensure you secure the best long-term option and are not swayed by the short-term gain of a welcome gift.

That said, if all your quotes are similar in price, why not utilise the free gift offer! The most important thing is to compare multiple quotes in order to find your perfect policy.

4. Premium payments cease

Over 50s plans are lifetime policies, as in they provide cover for as long as you live, (as long as you continue paying your premiums).

However, some over 50 plans do not require you to continue paying premiums for the rest of your life.

For example, Legal & General’s over 50s cover, allows you to stop paying your premiums when you reach 90 years of age, whilst cover remains in place until you pass.

If you live well into your 90s, which is becoming increasing common as life expectancy increases, this could provide a great saving.

Alternatively, some providers allow you to stop making premium payment once the policy has been in place for 30 years.

Therefore, arranging cover at the age of 50, could mean you have no more payment to make from the age of 80 upwards.

5. Only need to cover funeral costs? Consider other policy types

One of the main reasons people take out an over 50s plan is to cover rising funeral costs, ensuring this significant cost does not fall to loved ones after you’re gone.

According to research from SunLife the average cost of a funeral is now £4,417, whilst the total cost of dying is an astonishing £9,493. This figure has increased 130% in the last 16 years and this trend is forecast to continue.

However, if funeral costs are the only aspect you need to cover you may want to consider a prepaid funeral plan instead. A funeral plan allows you to lock-in the current cost of a funeral, avoiding spiralling costs and not subject to inflation.

Some over 50s plans have tried to counter this by offering a funeral benefit option.

This is where the insurer partners with a funeral plan provider and the proceeds can be paid directly to the funeral plan provider who then generally makes an additional contribution to the funeral costs, (usually around £250). However, unlike a funeral plan this benefit is not immune to rising costs and does not lock in the rate at the time of taking out the policy.

Lastly, whilst an over 50s plan is a great option for many because the application is simple and acceptance is guaranteed, the maximum cover amount is only around £25,000. Enough to cover funeral costs and perhaps provide an inheritance.

However, if you require a much greater sum assured you may want to look into whole of life cover.

With this option you could secure up to £1,000,000 of cover, but the key difference here is you will be asked medical questions as part of the application process.

If older, but still in good health why not compare over 50s plans and whole of life quotes to see how they compare. Because the insurer has a better picture of your health, vs an over 50s plan, you can secure a much larger cover amount and may be able to get lower premiums too.

In summary

As you can see from this article, an over 50s plan is a great option, but depending on your budget, current health and the level of cover you require, it is not always the best option.

In order to secure the most cost-effective and beneficial cover, it is always best to compare not just different insurers but different policy types as well.

At Reassured we can compare both life insurance and funeral plan quotes on your behalf, and we do not charge you a fee for our award-winning service. We are also able to help you write your policy in trust if you require help.

Compare quotes for free at Reassured.