Life insurance is one of the most common forms of insurance in the UK and an estimated three-quarters of the adult population has such cover. It is typically used to provide some degree of financial security to surviving dependents if you die within a given period (defined by a term life insurance policy) or when you die (if you have a whole of life insurance policy).
Over 50 life insurance
In recent years, a particular refinement of the principle has led to the development of over 50 life insurance – a product which may be especially suitable for ensuring adequate financial provision for your funeral when you die.
With an over 50 life insurance policy, the premiums you pay guarantee an assured cash lump sum when you die and is paid directly to your designated beneficiaries – whom you may ask to use those funds specifically to help cover the costs of your funeral.
Over 50 life insurance is different to many other types of life insurance, because of its particular advantages to anyone over the age of 50:
- there is no medical – whatever pre-existing medical conditions you may have;
- acceptance for cover is automatic – whatever your current state of health orlifestyle choices;
- you choose the amount of cash settlement to be paid out at the beginning of the cover and that amount is guaranteed to be paid when you die;
- premiums remain at the same monthly fixed rate throughout the remainder of your life; and
- the relatively lower cost of premiums for an over 50 life insurance policy may prove a more economical option than purchasing a prepaid funeral plan.Factors to keep in mindOver 50 life insurance is effectively a whole of life insurance policy – it is not restricted to any particular term but pays out whenever you die.
By the same token, you need to bear in mind that premiums remain payable for the rest of your life – or, with some policies, until you attain the age of 90 years. If, for some reason, you are unable to keep up with the payment of the monthly premiums when they fall due, the policy is automatically cancelled, without any cash-in value.
Although the lump sum cash benefit is guaranteed, you might want to bear in mind that, depending on the number of premiums you pay during the rest of your life, you may have paid more in premiums than the sum eventually paid out.
You also need to be aware that the effects of inflation may reduce the real value of the final cash settlement – meaning that it covers less of the funeral expenses you may have originally expected.
Whilst an over 50 life insurance policy continues to offer a relatively low cost way of making provision for your funeral expenses – or simply to leave a some cash to your beneficiaries – its potential limitations might suggest that greater financial certainty is offered by a prepaid funeral plan. This is where payment for the major part of your funeral expenses is guaranteed, paid at today’s prices and therefore represents a more reliable hedge against inflation.