If you live in the UK, you will have seen that many advertisements that are running on the TV trying to convince you to buy life insurance for the over 50s. They all say that there are no medical questions, and your loved ones will get a lump sum when you die. They also offer free gifts galore for signing up for a policy, or even for just making an enquiry. If you are thinking about signing up for over 50s life insurance, here are some of the facts that you should be aware of before you do.
It is quite likely that will pay in, more than is paid out
It is important to remember that over 50s life insurance policies are not savings plans, they are insurance policies, and that means if you start your plan at a relatively early age, you are more than likely to pay in more than will ever be paid out. For example, if you were to sign up for the plan advertised on TV that you get "a free Parker pen just for enquiring" at the age of 50, if you lived beyond the age of 75, you will have paid in more than your relatives will ever receive.
You have to keep on paying until you die
Because it is an insurance policy, the moment you stop paying the premiums, your cover stops and you will lose your money. It's no different to a motor vehicle policy; there is no value in the policy itself that you transfer, or cash in.
You should around for over 50s life insurance
The amount that is eventually paid out by these life insurance policies can vary considerably from provider to provider and they can have very different terms and conditions. Don't be swayed by free gifts and well-known TV personalities, shop around before you sign up for a policy. The difference in the amount paid out by different providers on a £20 a month policy could be as much as £2,000.
Don't forget about inflation
The promise of a guaranteed lump sum, and premiums that never vary, may sound very tempting, but, has the provider taken inflation into account? Your lump some may pay for your funeral costs today, but it may not do so in thirty years' time. Some policies are inflation linked, and some are not.
The premiums are dependent on age
The advertisements make a big play on how much your relatives would receive for just a small premium of £5 per month. That is based on the assumption that you start the plan at the age of 50. The older you get, the higher the premiums will be, and the lower the amount of the eventual lump sum paid out will be. Different providers also have different maximum ages that you can start a plan.
If you only pay a small premium, the policy is unlikely to cover your funeral costs
The major factor that attracts people to over 50s life insurance is the thought that it will pay for their funeral costs, but if you only pay a relatively small premium, that is unlikely to be the case. For example, if you were to start a plan at the age of fifty paying £20 per month, the final amount paid on your death would be in the region £7,000. The average cost of a funeral in the UK, at today's prices, is already approximately £8,000.
Most policies will not pay out if you have been in the scheme for less than one year
Death is never a pleasant subject, but let's be blunt. If you are unlikely to live for more than twelve months, then most over 50s life insurance policies won't pay out, because they require a minimum of twelve month's premiums to have been paid first.
Is over 50s life insurance worth the cost of the premiums?
Whether or not, over 50s life insurance is value for money will depend on your personal circumstances and your health. It does give you peace of mind that there will be an amount of money available to help with your funeral costs, but if you live to be a ripe old age, you would have been better off, putting the money in a savings account. What it does do, however, is it insures you for an unexpected early death.
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