Over 50 Life Insurance

Over50s tend to have well organised lives, which includes helping out their families. One consideration of this is what happens when they are no longer around. So, having some form of life insurance which guarantees to pay a lump sum to their family when they have gone will ensure peace of mind.

Over 50s Life Insurance

This is not an issue many people like to think about but it is one which can cause a great deal of heartache for those left behind, who are then faced with the funeral expenses. 

There are two types of life insurance:

1. Protection only
2. Investment type

Protection only insurance, also called ‘term insurance’ pays out a pre-determined amount if the insured person dies within a stated period of years.  If you do not then you get nothing.  Basically, it is the cheapest way of buying the cover you need.  There are many variations on this basic cover such as whole-of-life policy, and a maximum protection policy.  These too provide cover for as long as you live.  The maximum protection policy enables you to purchase a high level of cover for a low premium although only at an initial stage.  The problem with this is that the premiums can increase, and quite substantially in later years.

With protection only or term insurance the policy and amount of premiums are determined by your age, health, lifestyle, the level of cover and the term you choose.  There are several types of term insurance which include amongst others, increasing term insurance, increasable term insurance, decreasing term insurance and renewable term insurance.  There are advantages and disadvantages to all of these and so you will need to determine which best suits your requirements.

If you have a job, hobbies, or a lifestyle which is seen as risky then you may find that you are quoted a higher premium than normal, or you may even be refused cover.

Investment type or endowment policies can pay out if you die within a specified period, or even if you don’t but they take a long time to build up in value and can be an expensive way of buying cover even though they may seem an attractive option.  They are however, not an ideal choice of protection for your dependents.

If you decide to go ahead and purchase life insurance the next step to consider is how much.  What you will need to take into account is the needs of any dependents that you may have.  If you were unable to work for a long period of time or to die, then financial hardship may ensue for your partner and dependents.  This is especially the case if you were the main breadwinner.  This means everyday living costs such as bills and mortgage (if applicable) would need to be taken care of. 

So, you will ascertain what amount of income your family would need in the event of your death, which will determine the amount of life insurance you will need.  This can either be a lump sum paid out to cover existing mortgage payments or to replace your income which ceases upon your death.  This lump sum is tax free.

You and your partner may be thinking of taking out individual policies but there is also the option to take out a joint life policy.  This type of policy operates as follows: a ‘first death’ policy which will cover both of you and pays out on the death of whoever dies first.  And, secondly, a ‘last survivor’ policy which pays out when the remaining partner dies. 

If the proceeds of a life policy are paid to your estate upon your death then this could be liable for inheritance tax.  There could also be a long delay before it becomes available to your dependents.  If you choose to write an insurance policy in trust, then this avoids these issues and so ensures that the proceeds go directly to your dependents.  Most insurance companies will offer this option, at no extra cost, and will have standard forms for doing so.

Another alternative is a ‘life of another’ policy: This will pay out directly to someone else when you die, for example, spouse or unmarried partner.  There are two options: ‘own life’ policy for payment on your own death, and ‘life of another’ policy in which your partner takes out life insurance which is based upon your life. 

With all forms of life insurance, you must have an insurable interest in the life of the person covered, at the time of taking out the policy.  This means you stand to lose out financially if that person were to die.  It is assumed that you have an unlimited insurable interest in your life and that of your partner.