Life insurance for over 50s
As a general rule life insurance costs increase in line with how old you are. This means that you should try and take out a life insurance policy as early as possible if you want to pay less for your plan.
In This Guide:
- Acceptance guaranteed
- Premiums fixed
- Free cover
- How much will you get back?
- Increasing life insurance
- Minimum payments
- Can you keep up with payments?
- Writing "in trust"
One good thing about taking out life insurance when you are over 50 is the fact that most insurers will guarantee you acceptance onto a life insurance plan. Most of the time you will not have to undergo a medical examination before they allow you to sign up. This applies to anyone between the age of 50 and 80.
Another benefit of taking out life insurance when you are over 50 years old is the fact that you will be offered a plan with fixed premiums that do not change over the course of your plan. Normally you will be able to get a premium for as little as £4 a month, with the most expensive ones costing about £100.
This means that things are pretty simple because all you have to do is decide upon the amount that you would like to cover and your price will be set for you. As long as you stay on top of your payments, the amount that your family will receive will be the same as you agreed.
If you take out a long term policy you should remember that you will end up paying quite a lot if you live for a very long time. However it is worth noting that many life insurance policies offer free cover from the age of 90 onwards. This is designed to lighten the financial burden of the premiums on you in your latter years.
How much will you get back?
It is worth sitting down and working out how much exactly you will receive out of a policy compared to how much you will pay in. If you sign up to a plan that pays out £10,000 and you have to £25 a month, then you live for a further 33 years your policy will not pay out as much as you pay in.
Increasing life insurance
Many companies offer life insurance that increases over time, the reason that they do this is to make sure that the payout doesn't lose value relative to inflation. This can be a good route to go down because it means that you won't end up with your family receiving less in real terms than they would have otherwise. One thing to make sure is that you can keep up with the rising premiums because if you don't, you will lose any cover you do have.
Most insurance companies work upon a system that is referred to as a minimum payment. This means that you will have to make monthly payments for a year or two in order to receive the agreed upon sum. If you do not make payments for this long because you die beforehand, your insurer will pay out the amount that you already paid into the scheme but no more.
Can you keep up with payments?
One of the most important things to consider before you sign up to a life insurance plan, is whether or not you will be able to keep up with the price of the premiums. You cannot cash in a life insurance policy so if you fall behind on your payments, then you are at risk of losing everything that you have paid in.
Writing "in trust"
Even though life insurance payments almost never get affected by income or capital gains tax, they can sometimes fall into inheritance tax. This means that you risk losing 40% of the amount that is paid out. To avoid this you should talk to your insurance company about making sure your policy is written "in trust", this is the best way to sidestep inheritance tax.