Over 50s life insurance vs funeral plans
Last updated: 22/04/2022 | Estimated Reading Time: 4 minutes
Ensuring that there is a financial plan in place for your funeral may not be something people want to think about, but it is important. Having the appropriate arrangements offers peace of mind, as you know that everything is taken care of at a difficult time for your loved ones.
Two of the best ways to do this are over 50s life insurance and funeral plans. But what are they, and which one is better? We’ve taken a look at both so you know what to expect.
Over 50s life insurance is a specific type of policy for people between the ages of 50 and 80.
Despite coming with a slightly different set of stipulations due to the age bracket, the basics are the same as any life insurance policy. You sign up for a set period, pay your premiums, and if you pass away within the term, you will receive a lump sum.
This can then go towards anything you like. While covering funeral costs is a popular choice, it is by no means limited to this.
What sets over 50s life insurance apart, however, is that it offers ‘guaranteed acceptance’. This means that, no matter your health status or medical history, you will be able to find cover.
When you take out a funeral plan, you are directly paying towards the cost of your funeral at current rates. This can either be done through an instalment plan or in a lump sum.
If you choose to do it over time, typical terms range from one to ten years. Once the balance is cleared, everything is paid for and when you die, the provider will pay for your funeral.
Different types of plans often have different stipulations of exactly what is covered, so make sure you check the fine print to make sure your family won’t need to pay anything themselves.
This depends on what your preferred outcomes are. If funeral costs are the biggest concern of yours, then a funeral plan is probably best.
It sets out a simple payment plan which ensures, that when you pass, your family or your estate won’t need to pay for the ceremony. As the rate is fixed, it protects against increasing funeral costs and inflation, meaning the sooner you can pay it off, the less you will need to pay overall.
Its downsides however are that it is very rigid, and the money paid in cannot be used for anything else, which isn’t going to be suitable for everybody.
An over 50s life insurance plan offers far more flexibility, meaning that if your payout was £20,000 for example, you could put half of that towards funeral costs, and the rest could be paid in a cash lump sum to your family.
The risk you run with an over 50s plan is that funeral costs could outstrip the payout, meaning that your passing still comes with a financial burden. As the payout on an over 50s plan is fixed, inflation might make it a less appealing investment, as its real term value diminishes over time. This is especially important to consider if you are opting for a particularly long or whole-of-life term.
So, unfortunately, there is no one simple answer. If you want flexibility, it’s best to go for an over 50’s plan. If, however, your main concern is funeral costs, then a funeral plan will be the best option for you.
Generally speaking, a funeral plan will cost more in the short term as you need to pay either immediately or within 12 months, whereas the costs of an over 50s plan are spread out over many years. However, the overall amount you pay will vary greatly depending on the level of cover, repayment terms, and personal circumstances.
There are some situations when you can change your life insurance policy into a de-facto funeral plan. You might do this if funeral costs suddenly become more important to you.
Generally, nothing will change, except you will generally receive a small financial incentive from your provider (usually a few hundred pounds) in exchange for locking the payout to go towards a specified funeral director.
If you’re not sure which one of these is going to be best for you, then you can try out our life insurance comparison tool to see what’s on the market right now.