Life insurance for over-50s

Life insurance for over-50s, like other types of life insurance policies, provides protection and financial assistance to the policyholder's family in the event of his death. The aptly named life insurance is designed to cover only those who are at least 50 years old. But what really sets this type of insurance apart from others is the ease with which an applicant can obtain the policy.

Types of Cover

• When you sign up to an over-50s life insurance policy, you will be asked to determine how much cover you need and select between a capped and uncapped policy. The capped option allows you to pay your agreed monthly premiums until you have reached your chosen amount of cover. When you select an uncapped policy, you will be required to make payments for the rest of your life. This life cover also offers you the option between a cash lump sum or help with your funeral costs. Funeral benefits differ between insurers, but some may pay an additional 10 per cent of the assured amount towards the cost of your funeral.

Eligibility

• This insurance cover is specifically designed for UK residents between the ages of 50 and 80. Unlike other varieties of life insurance available in the UK, for which you require a medical examination as part of your application, life insurance for over-50s does not require a medical, and most insurers offer guaranteed acceptance.

Benefits

• Life insurance for over-50s is an affordable way of ensuring that your family is left without any financial burden after you are gone. The insurance payment can help your loved ones give you a good send-off, clear any unpaid bills you may leave behind or just support them through anticipated hardships. Your monthly premiums will be fixed at the price you choose and, depending on your insurer, your policy may pay out as early as one year later.

How it Works

• If you are covered by an over-50s plan, your insurer will normally pay out 150 per cent of the premiums paid until the date of your death if this is within the first 12 months or two years, depending on the insurer. For most insurance companies, the payout limit is £32,000. However, if your death occurs any time after this period, your insurance company will pay out the amount that you assured when you took out your policy.

Drawbacks

• Because life insurance has no cash-in value, you will lose all the money you have paid if you decide to cancel your policy. Additionally, with many people living beyond the UK's life expectancy, which are 74.4 and 81.6 years old for men and women of 2010, you may end up paying more than your assured amount, especially if you take out an uncapped policy in your 50s. Another disadvantage is that, if you pass away in the first year, your family will not receive more than the total amount of premiums you paid. As far as tax law is concerned, although the payments are tax-free, they may still be subject to inheritance tax since they will be paid to beneficiaries.