If the pandemic has forced you to think about what would happen to your family if you passed away, you’re not alone. Insurer Royal London has seen a “huge upsurge” in demand for life insurance, as millions of us have known a relative, friend, or colleague affected by Covid-19.
Worryingly, new research revealed in Financial Reporter has found that most over-50s didn’t have life insurance at any point during the pandemic, with protection having fallen down the priorities list for many.
The data shows that just one-third of over-50s were covered by life insurance across the past year. The study found that this was partly driven by the fact that more than one in four people over 50 (28%) don’t want to think about this subject or consider end-of-life planning.
One of the reasons many older people don’t consider life insurance is simply because they think they are “too old” to get cover. However, this often is not the case – so read on to find out why it’s not too late to get the protection you need.
More important than ever to have life insurance in place
The study in Financial Reporter found that over-50s in some regions of the UK were more likely to be covered than others. The percentage of over-50s with life insurance was highest in Scotland (47%), Northern Ireland (46%), and Wales (37%) and lowest in London (28%) and the West Midlands (26%).
Reflecting the recent uptick in interest in life insurance, 3 in 10 over-50s agree that it’s more important than ever to have life insurance in place. This rises to 47% for over-50s who still have a mortgage, indicating that having a mortgage debt is a key factor in the decision.
So, why do so few over-50s have cover in place?
“I’m uncertain about whether it would cover Covid-19”
One in five (21%) of those who do have life insurance are uncertain as to whether it would cover issues arising from catching Covid-19.
As we have previously discussed, all the leading insurers in the UK have confirmed that, if you have life insurance in place and pass away due to Covid-19, they will pay the claim. You typically just need to ensure that your premiums are up to date and that you answered the underwriting questions accurately on your life insurance application.
Assuming you were honest on your life insurance application and have paid your premiums, you can be reassured that your beneficiaries will receive a lump sum if you do pass away because of Covid-19.
“I can’t afford it”
One in eight (13%) over-50s said that they would struggle to cover the expense of life insurance.
In addition, a similar proportion (14%) said they would consider cancelling their cover if their finances deteriorated – a worrying figure considering how many already don’t have insurance.
While it’s true that life insurance will generally cost more if you’re 55 than if you’re 35, the cost of protection is likely to be less than you expect. We’ve previously looked at how most people routinely overestimate the cost of life insurance – indeed, a Legal & General study found that 9 in 10 people think life cover is more expensive than it actually is.
“I’m too old for cover”
A common misconception that older people have is that they are simply too old to get life insurance. Just under one in five (18%) of those in their fifties think they’re too old to get life insurance, with this figure rising with age.
As a result, more than half of over-50s (52%) say they would rather put money into savings than be covered by life insurance.
Let’s look at this issue in more detail.
Many insurers will offer terms to over-50s
Putting life insurance in place can give you valuable reassurance – whatever your age. Indeed, two in five (40%) over-50s say they have greater peace of mind that their family don’t have to worry about meeting costs (including funeral costs) when they pass away.
When it comes to comparing the cost of life insurance, there are lots of factors an insurer takes into account:
- Your age
- Your health
- Your family medical history
- How much cover you want, and the term of the policy
- Your occupation and hobbies.
If you’re aged 55 and you’re looking to cover yourself for 20 years, there will be many insurers who will offer terms for the protection you need. We work with dozens of the UK’s leading insurers and we can help you to find the right cover at the right price.
Bear in mind that if you choose “term insurance”, it will protect you for a specific period. The policy has no cash-in value so, if you don’t die within the term of the policy, you won’t receive anything back.
However, you will ensure that, if you die within this period, your loved ones will benefit from a lump sum. They could pay off your mortgage, use the money to maintain their lifestyle, or pay for funeral costs.
Remember also that some insurers will have an upper age limit for expiry of the cover. This means the term you choose may be restricted to age 75 or 80.
Consider specific “over-50s” life insurance
If you’re over 50 and you’re considering a traditional life insurance policy, the insurer will ask you questions about your own health and medical history. If you’re not comfortable with these questions, or you have experienced significant medical issues in the past, an alternative option may be to consider “over-50s” life insurance.
This type of protection is designed to leave a small lump of money for your family as a gift, or to go towards your funeral costs.
Most insurers won’t ask you any medical questions when you apply for cover, although there may be certain eligibility criteria you need to meet, such as being a UK resident. If you meet the terms and conditions of the policy, and you’re aged 50 or over, you’re guaranteed to be accepted regardless of any medical issues you might have.
When you take out over-50s cover, the protection will last for your lifetime. This means you must commit to making payments every month until a specified date or, with some policies, until you die.
- If you die within a few months or years of taking out the protection, your beneficiaries could end up with a lump sum that’s worth far more than you paid in.
- If you live for a long time after taking out cover, you could well pay more in premiums than the lump sum that’s paid out.
For this reason, it can pay to seek advice before you commit to such a policy. Many people end up paying much more in premiums than the lump sum their loved ones receive, so an alternative approach may prove more suitable.
If you’re over 50 and want the peace of mind that your family will be financially supported when you die, we can help. We have wide experience of working with customers of all ages, and our strong relationships with the UK’s leading insurers mean we can help you find the cover you need.
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