Generally speaking, the older you get, the higher the life insurance premium will be. So if you are thinking about getting life cover at an older age, it’s worth thinking about the specialist over 50’s policy.
Everyone is accepted
One of the biggest benefits of an over 50’s policy is that everyone who applies and is between the age of 50 to 80 (sometimes 85), will be accepted – you don’t even have to do a medical test nor will you be asked medical questions.
The premiums on the over 50’s plan is fixed and available from around £4 to up to £100 per month. You simply need work out what level you would like to be assured for and how much you can afford to pay per month. For example, you may select the sum assured to be £25,000 with a monthly premium of £80, meaning your loved ones will receive the £25,000 after you pass away.
When taking out an over 50’s life insurance policy it is important to note that you may be paying the premium for a long period of time , may be over 30 years, so you should consider this factor in your decisions. However after a certain age, usually 90, some insurance companies waive the premium and continue offering cover for free.
Premiums paid is higher than pay-out amount
Taking the example above and presuming you get the over 50’s life cover when you actually turned 50, then after the age of 77 you would have collective paid more in premiums then the total sum assured amount. So depending on how long you live, the insurance policy can be more expensive.
Like most life insurance policies, the over 50’s sum pay-out is in nature a level term, meaning it does not go up or down over time, so from our example inflation will erode some of the £25,000 payout. It’s important to take this into account as what you can afford with this much money now, is likely to be much lower when your family receives it.
To protect against inflation some insurance companies offer an inflation adjusted pay-out but this means that the sum assured and premium are subject to review every year. Whilst this type of policy holds value over time, you must be aware that the increased premium is difficult to anticipate and it must be paid otherwise the policy will cease to exist with no reimbursement.
What’s more, insurance companies require you to have paid premiums for at least one or two years before they will give a full pay-out. If you pass away before that period, then you will only receive the premiums back.
So, using our example above, if you pass away after 6 months then pay-out will only be for £480 (£80 x 6months) but if you pass away after the minimum period/early years of the policy then your family will receive the full £25,000.
Some people take out the over 50s life insurance to help their family pay for the cost of the funeral. In this instance, you should let the insurer know so that they can give the pay-out directly to the funeral company and you will normally get a discount too. So it may be the case that the insurance company will increase the pay-out by a certain percentage e.g. 10%, free of charge, or simply offer an outright discount on the funeral cost e.g. £250.
To avoid paying un-due tax, you should ask your insurer to write the policy ‘in trust’ – this will mean that money will not be added to the estate and hence is not implicated to inheritance tax (IHT).
For tax year 2014-2015, the IHT threshold is £325,000 for a single individual or £650,000 for a married couple and registered civil partners. Anything over this amount is taxable at 40% meaning your loved ones could be left with a massive tax bill after you pass away. On top of the tax advantage, putting the money in-trust allows it to be available faster too – if it is not in-trust then the executors of the will mandatorily have to pertain for a grant of probate, which can take a few good months.
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