Life lesson for the over-50s
MILLIONS of Britons are still paying money every month into a basic type of insurance called an over-50s life plan, despite long-standing criticisms that cover is expensive for what you get.
New research suggests people could be paying twice as much as they need and traditional types of life insurance offer better value.
Over-50s plans offer life insurance from as little as £4 a month with guaranteed acceptance regardless of your health, without the need for a medical.
The payout can be used for anything although most intend to leave a guaranteed sum of a few thousand pounds to cover funeral costs, which now average around £4,000, or to pass on a cash gift to their loved ones.
Options
SunLife offers the best-known plan, promoted by TV chat show host Michael Parkinson, while Asda, Aviva, Direct Line, Legal & General, OneFamily, Royal London and Sainsbury’s Bank also offer plans. However, life insurance and protection broker Cavendish Online says the over-50s should look past marketing tactics, which can include shopping vouchers and free gifts such as TVs, as they risk throwing thousands of pounds down the drain by selecting the wrong kind of life cover.
It argues that a traditional wholeof-life insurance policy may offer much better value. This continues for the rest of your life and is often used to cover much larger sums of several hundred thousand pounds to help with, say, inheritance tax planning, after a full medical.
It can also be used for smaller sums of cover with only a simple health questionnaire. Cavendish figures show that a healthy 50-yearold would pay £18.96 a month for £15,000 whole-of-life cover against £43 a month on an over-50s plan for the same sum.
If the policyholder lived for another 30 years they would pay total premiums of £6,826 on the whole-of-life plan, against £15,480 with the over-50s plan. Managing director Ian Williams says: “On the over-50s plan they would have paid out more than they will get back.”
Williams says that over-50s plans impose a “moratorium period” too: “This means the policyholder cannot claim if they pass away within the first year or two of cover, depending on the insurer.”
Crucially, the plans also trap you as they have no cash-in value. Williams says: “If you miss a single monthly payment or cancel your plan, you stand to lose every penny that you have paid in.”
A Sainsbury’s spokesperson says over-50s and whole-of-life insurance are very different products. “Whole-of-life is more complex, the sum assured is typically higher, the application process can be lengthy and it is usually sold through financial advisers.”
Typically, people choose an over50s product because no medical is required and premiums are fixed.
“We recommend the over-50s do their research to find the right policy for them,” they add.