Many people take out term life insurance policies to cover them while they’re working, raising children, and paying off a mortgage. Those policies will typically lapse by the time you’re in your 50s or 60s, and you’d struggle to qualify for a new term life insurance policy, or face very high premiums for it.
At this point, some people take out over 50s life insurance. It’s a type of whole of life insurance, which means it will last for the rest of your life and provide a nearly guaranteed, fixed pay-out to your loved ones. Provided you’re under the minimum age, typically set at 80 or 85, acceptance is guaranteed.
Despite these advantages, over 50s life insurance policies are subject to a lot of debate. Detractors note that the pay-outs are small. If you live for a long time, you may end up paying more in premiums than your family receives.
Below we’ll name the advantages and disadvantages of over 50s life insurance policies. We’ll also examine the circumstances in which it makes sense to take out an over 50s policy and what other financial and insurance products might be more suitable for you.
In This Guide:
Advantages of over 50s life insurance policies
Over 50s life insurance policies have several selling points:
- Guaranteed, fixed pay-outs: Term life insurance policies only pay out if you die within the policy term, usually within 30 years of taking it out. But with over 50s life insurance policies, the pay-out is guaranteed, provided you’ve diligently paid the premiums each month. That means you can be sure your loved ones will receive money when you die. The amount is also fixed, so you’ll know how much you’re leaving behind.
- Guaranteed acceptance: If you fall within the policy’s age range, typically 50 to 80, you’re guaranteed to be sold a policy. You all won’t have to answer questions about your health history or undergo medical checks to qualify, as you might with other forms of life insurance.
- Affordable premiums: Because the pay-outs on over 50s life insurance policies are small, the premiums are very affordable. You may be able to fund cover for just a few pounds each month.
- Free cover past a certain age: Many over 50s insurance policies have an age cut-off past which you don’t have to keep paying in. This is often set at 80, 85, or 90. After that period, you’ll still be insured and your loved ones will benefit from the pay-out after your death, but you won’t have to pay any more premiums.
Disadvantages of over 50s life insurance policies
But there are also some drawbacks to these policies:
- Small pay-outs: The pay-outs on over 50s life insurance policies are typically under £10,000, and could be as low as £1,000. This is significantly lower than the pay-outs provided by other types of life insurance policies.
- You may pay more in premiums than your family receives: Because of the low pay-outs, you could end up paying more in premiums over the term of your policy than your family ultimately receives, particularly if you’re very long-lived.
- Pay-outs eroded by inflation: The payout on your policy is set when you take it out. If you live for decades past this, inflation could significantly erode the real value of this pay-out when your family finally receives it.
- You can’t miss a payment: You can invalidate your over 50s life insurance policy by missing a single monthly payment. This means your family won’t receive the pay-out when you die, and you won’t be able to get your premiums back either.
- Waiting periods: To offset the risk of covering older people, insurers typically put a waiting, or deferment, period of 1-2 years into over 50s policies. If you die within the waiting period, the policy won’t pay out, although your family may see any premiums you paid refunded.
When should you take out an over 50s life insurance policy?
Over 50s life insurance policies can be worth it, provided you want to leave a small amount of money behind, often earmarked for a specific purpose:
- You want to cover your funeral expenses: According to insurer SunLife, the average cost of dying in the UK stood at £8,864 in 2021, including the funeral, burial, and optional extras like wakes. Even if you want just a simple send-off, it will be costly. The average basic funeral cost £4,056 in 2021. An over 50s life insurance policy could cover these costs for your family at an already difficult time.
- You want to pay off debts: If you have a small amount of debt you don’t want to leave behind for your family, you might consider an over 50s policy with the pay-out matched to this debt.
- You want to leave a gift behind for your family: An over 50s life insurance policy won’t leave a large inheritance for your loved ones, but it will give them a few thousand pounds – not a bad gift at all.
But if you want to provide for your family after your death, or if you expect to be very long-lived, over 50s life insurance won’t be suitable.
Alternatives to over 50s life insurance
You might want to consider whether another financial or insurance product might meet you and your family’s needs better than an over 50s life insurance policy could:
- Savings products: If you want to leave a small sum behind for your family, you might be better served by a savings product like a fixed-rate bond or an ISA. These products will guarantee your family gets all the money you pay in, while interest payments will limit the value lost through inflation.
- Other types of whole of life insurance: If you want life insurance cover into your golden years and are in good health, you might want to consider a more traditional whole of life insurance policy. These come with higher pa-outs, but as with over 50s policies, they’re guaranteed. However, these policies can come with expensive premiums, and you’ll have to answer questions about your health and may face rejection on that basis.
- Funeral plans: If it’s just the cost of your funeral you’re concerned about, then you might be better off with a funeral plan. These are specific types of policy that offer a fixed pay-out to cover the cost of your funeral at current market rates. However, if you live for decades after purchasing your policy, inflation could mean the pay-out isn’t sufficient for the cost of the ceremony. For more information, check out our page on the benefits of over 50s life insurance compared to funeral plans.