What over-50s life insurance delivers

Over-50s life insurance aims to provide enough funding to cover any funeral costs or to ensure those left behind have some financial support put in place. The biggest advantage of such a policy is acceptance is guaranteed.

The advent of innovative products and providers has encouraged engagement in a healthier lifestyle Andy Nicholls

According to Simon Cox, funeral cost expert at Royal London, sales of over-50s and funeral plans have doubled in volume.

He says: “The growth in sales mirrors the rise in average funeral costs, which have increased over the same period from £1,900 to £3,702.”

People aged up to 80 and, in some cases, 85, can apply, meaning older people are almost certainly guaranteed acceptance, especially in cases where a regular insurance policy has been refused due to medical conditions.

The premise is pretty straightforward: the policyholder pays a monthly premium to the insurer and, in return, the insurer agrees to pay a lump sum to the policyholder’s family on death.

Unlike term assurance, where there is a specified timeframe for the policy to pay out, over-50s life insurance policies are whole of life, so they will pay out on death.

This is provided the policyholder has kept up with the regular premium payments and has outlived any minimum term imposed on the cover, before which the insurer will not pay out.

A further benefit is that for those who live beyond 90, many insurers stop demanding premiums and will let the person continue to be covered for free until the policyholder dies, although other firms will require the person to pay premiums for life.

SunLife, whose over-50s plan starts at £3.90 a month, also offers a total premium cap option, where, for a slightly higher premium, customers can choose the age at which they stop paying premiums.

The ease of access, relative low-cost and lack of form-filling can make over-50s life policies attractive for consumers. And advertising has played a big part in encouraging more people to consider later-life insurance.

Neil McCarthy, sales and marketing director for Direct Life, says: “Most purchases are self-directed, being driven typically from mailshots, advertising and TV.

“Most traffic is now directed online, where efficient processes and a simple application process makes this one of the easiest life policies to obtain.”

Graham Jones, core business director for SunLife, agrees distribution has changed significantly. He says: “Ten years ago we did not have an online proposition; 100 per cent of our applications were paper.

“Now, 80 per cent of all sales involve digital in some way. Most sales (45 per cent) are generated over the phone, with 19 per cent purely online.”

Yet despite the cost and easy access, such plans do not always go far enough.

Mr Jones adds: “We also offer other insurance options. For consumers who want the money to be used specifically to pay for their funeral, we offer pre-paid funeral plans.

“People often choose this because it allows them to make the financial provision and some of the practical arrangements with the plan.”

However, over-50s and funeral plans may not always be appropriate for people who may qualify based on their age, but whose robust health and energetic lifestyle could make them eligible for more flexible standard products.

Tom Conner, director for Drewberry Insurance, says generally, if a person aged 50 and over is in good health, over-50s plans could represent “poor value for money relative to traditional underwritten life products”.

He explains: “Someone’s health will have a big impact on whether they go for normal life or over-50s. If they are in good health, then normal/underwritten life products will be cheaper and more comprehensive - ie the policy would not have a restriction on being able to claim for illness-related death in the first 12/24 months.

“A healthy over 50 has more choice as they can get standard rates for the normal life products as well have access to the over-50s range.

“The only real benefit of the specific over-50s plan is that it is fast and easy to set up, because it is not underwritten.

“Really, anyone over 50 should speak with an adviser and make a real comparison of all options before making a decision. I worry too many people get influenced by the TV adverts featuring older celebrities and a free pen, and pile in blindly.”

Moreover, as Mr McCarthy says, plans offering more complicated requirements for the over-50s remain a mixed bag, and a basic plan may not be relevant for some over-50s.

He says: “Other requirements involving capital preservation, insured solutions for long-term care and inheritance tax planning remain mixed.

“Identified IHT issues, especially where gifting is part of the solution, can be protected by simple term life plans or specific gift inter vivos (GIV) plans, covering potential tax liability.

“Whole-of-life plans will also have a part to play in providing a guaranteed payment on a first or second death.

“The ability to place policies in trust can also deliver greater flexibility, particularly if keeping assets within the ‘bloodline’ planning for care fees and IHT are the drivers.”

Yet despite the low cost, multiplicity and relative ease of purchasing such plans, coupled with a discernible drive from the insurance industry across various media to get more households thinking about the future and protecting themselves and their loved ones, penetration is still low.

Research has shown while sales of over-50s and funeral plans may have doubled over the past 10 years, there are still too few people in the UK with any form of cover in later life.

Most just do not know about it, or see the need for it - until too late.

According to research conducted recently by insurance agency British Seniors, only 21 per cent of adults aged 50 and over have some form of life cover or funeral cover in place.

Dave Sutherland, UK managing director of Nielson Financial Services, for its British Seniors Insurance Agency brand, says this is a matter for concern.

He comments: “This figure is worrying and highlights an urgent need for people to ensure they have cover in place.”