Life Insurance  

AE cover would be a life-saver

Forty is the new 30; 50 is the new 40; 60 is the new… well, you get the idea. We are all – inevitably – getting older, living longer and healthier lives and enjoying much more rich and varied retirements than generations past.

Fixed retirement ages, though still marked by the date at which men and women can draw their state pension, are being discarded or ignored in favour of working well into later life, becoming a “pentrepreneur”, maintaining a portfolio career or taking ‘gap’ years for those pensioners with the money to travel the world.

And this trend is set to continue. More than 22 million of the UK population are now over 50. Indeed, for the first time in recorded history, the UK’s over-65s outnumber those under the age of 16. And many more of us are making it well into our 80s – pensioners currently aged 75 can expect to live another 13 years if they are female, and nearly 12 more years if they are male.

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The upshot of this is that many of the products designed for generations past are no longer relevant, and new solutions and approaches are needed to meet the requirements of our changing demographics. Life insurance – and the wider protection market – is no exception to this rule.

As most advisers will be aware, probably the most common and affordable form of life insurance is term assurance. Term cover pays out a cash sum if the customer dies during the length of the policy. For an over-50, term cover is essential in terms of ensuring any mortgage debt can be covered in the event of a sudden loss, as well as to help protect the surviving family’s lifestyle and cost of living expenses. Term assurance premiums will not go up, unless the customer alters the policy, so there is certainty for the insured in terms of monthly outgoings. Many term policies include additional benefits, such as terminal illness cover and accidental death benefit which pay out a lump sum on diagnosis of a terminal illness or if the customer dies in an accident.

The graph here illustrates how the cost of term life assurance increases with age, based on a customer at different ages taking cover until age 75.

Many over-50s will have some kind of term assurance if they own or have owned a property. So if that is the case, the next area to look at it would be critical illness cover. Critical illness cover is designed to pay out the customer’s chosen amount of cover if they are diagnosed with a specified critical illness covered by the policy during the length of their policy.

An alternative option to term assurance is a whole of life plan – a life assurance contract designed to give the customer a specified amount of cover for the whole of their life, which pays out a lump sum on death. When the customer dies, this money can be used to help pay the estate’s Inheritance Tax. If there is no IHT, the customer’s beneficiaries could spend or save the money as they choose.