Is Over 50 Life Insurance Worth it?

Mar 20, 2014
is over 50 life insurance worth it

bbc one showI can’t blame you for asking this question, especially if you watched Gloria Hunniford’s report on The One Show on Monday 17th March or have read the negative press that is published by the media every now and then, but with over 400,000 plans sold last year alone, can an over 50 life insurance plan really be a bad choice? Can so many people have got it so wrong? Is over 50 life insurance worth it?

Well the answer really depends on your personal situation.

If you want to provide your family with a cash lump sum when you die but are in poor health or unlikely to get life insurance where the state of your health is taken into account, then guaranteed over 50's life cover may be worth considering as you will be covered no matter what. You just need to be within the acceptable age limits, usually between 50 and 80 and live in the UK.

The fact that you could pay in more than the plan pays out is something that you need to consider, but this all depends on how long you live.

For example, let’s say Dave, a no smoker buys an over 50 plan at the age of 55 paying £15 a month; his family should expect to receive a cash sum of around £5,193 when he dies. What Dave needs to think about before buying the plan is how long he feels he will be around for (oh if only we had that crystal ball) to gauge whether he believes the cash sum paid out will be worth the money he pays in monthly premiums over the years.

Basically if Dave dies before he reaches the age of 83, the cash sum will be greater than the amount he has paid in premiums over the years. If however he lives longer, past the age of 83, then the total of his monthly premiums will exceed the cash sum paid out when he finally does die.

Of course another option could be for Dave to put money away in a savings account instead of buying an over 50 plan but he needs to question whether he will be disciplined enough to do it on a regular basis or if will he be tempted to ‘dip into the pot’ on a rainy day!

The thing with insurance is it’s all about risk. What happens if Dave is knocked down by a bus or becomes ill? Well as long as his death doesn’t occur within the initial period of the first one or two years of buying the plan, then his family will receive the full £5,193, regardless of how long he has been paying into the plan. Whenever Dave dies, his family will receive the money.

Unfortunately a close friend of mine knows all about this from bitter experience after losing his father. At 71 his Dad was far too young to leave this world but protecting his family to the end, unbeknown to his son, he had bought a guaranteed over 50 plan with the intention of using it to help with funeral costs. The reality was that it more than covered the cost of the funeral so I guess in that respect you could say the plan worked well and served its purpose however I know my friend would much rather still have his Dad by his side today!

You must of cause draw your own conclusion as to whether a guaranteed over 50 life cover plan is right for you. It really does depend on your own personal situation and requirements.

The really interesting thing is that Dave might have another option open to him; another type of whole of life insurance plan that also pays out a cash sum when he dies. If his health is good and he is happy to complete a longer application process that includes questions about his health and lifestyle, then Dave’s family could receive a cash sum of around £8,254 when he dies; over £3,000 more.

Regular whole of life insurance is an option often overlooked by over 50s which is a shame as it can provide at least 40% more cover. It works in a similar way but has a longer application process that will be accessed.

So although I can’t say whether an over 50 plan is right for you, what I will say is make sure you are aware of all the options available to you so when you do make your final choice, it’s one that you are happy with.

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Ashley Shepherd is an Over 50s Personal Finance Expert

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