Guide To Life Insurance Once Your Over 50
Why do I need Life Insurance ?
Life Insurance is a way of leaving your loved ones some money should you die unexpectedly. It is an insurance policy and you usually only get money when you die. That means the money this kind of policy pays out usually goes to your family rather than you
It is really important to think about how your family would manage without you and without your income. Would they be able to afford to pay the bills ?
What are the different types of Life Insurance ?
Term Life Insurance
This is a policy where you decided how many years you want to be insured for (‘the Term of the policy’) at the start. You will normally be asked a number of health and lifestyle questions, you may (not always) be asked to attend a medical, so that the insurance company can work out the risk of you dying within the Term. They will ask you how much you want to be insured for in the event of your death and will then calculate a monthly premium that you will need to pay every month for the Term of the policy. If you die after the end of the Term you will get nothing back.
There are some Life Insurance policies that also include what is called Critical Illness cover – these kind of policies pay out if you are diagnosed with certain ‘dread’ diseases, for example, cancer. These policies are intended to give you a lump sum of cash to help you if you are diagnosed with one of these diseases, but survive. For example, if you were to have a stroke it might not kill you, but it could mean that you could not work afterwards. In this case, this kind of policy would pay out – you could then use the pay out to supplement any government help you might get.
Guaranteed Whole of Life Insurance
Often called an over 50s plan or funeral insurance – is a policy where you normally pay premiums for life or until a certain birthday. The great things about these policies is that they don’t ask any health or lifestyle questions, so if you apply for cover, you are guaranteed to be accepted. These policies are ideal for people with health issues, but if you are in good health then you could potentially get much more life cover for the same level of premium if you were to take out Term Life Insurance. The thing is that lots of people don’t want to go through all of the health and lifestyle questions and opt for a Guaranteed Life Insurance plan because it is simple and quick to apply for.
How much Life Insurance do I need ?
The amount of Life Insurance you need will depend on why you are buying Life Insurance in the first place. It could be to replace your income, to pay off your mortgage or perhaps to pay for your funeral. Below we give you a few examples of how you might want to calculate the amount of Life Insurance you need.
Examples of amounts of Life Insurance you might need.
Leaving enough to look after your family. The way to work this out is to look at the amount of money your family need each month in order to live – this will include, rent or mortgage payments, council tax, electricity, gas, telephone, food, car expenses, pocket money and so on.
Work out how much this comes to each month. Then think about how long your family will need this amount of income for. So say you decide that your family needs £1000 per month and that you work out that they will need this until your spouse or partner reaches retirement age – let’s say that is in 10 years time – then very simply you will need Life Insurance of £1000 x 12 months x 10 years, so that’s £120,000.
Leaving enough to pay for your funeral. The first thing to look at here is the cost of a funeral in your area. You can do this by looking at one of the Funeral Cost calculators on the web – we recommend SunLife’s one. This calculator will give you the amount of Life Insurance you need.
The key thing to know here is that to make sure you are still covered by your Life Insurance policy at the time you die, then you will probably need to take out what is called a Guaranteed Whole Of Life Insurance Policy (we’ve explained this kind of insurance – see above). This is because Term Insurance only lasts for a fixed number of years whereas a whole of life policy, just as it sounds, lasts until you die.
How much does Life Insurance cost ?
Life Insurance costs vary depending on the amount of Life Insurance you want, your age and the kind of policy you want; i.e. whether you wanted to be covered for a specific period or until you die. Costs also vary significantly based on whether you are happy to answer health and lifestyle questions or not. Typically if you are happy to do this and are in good health, then you could get the same amount of life cover for around 40% less than you would pay for a policy without these health and lifestyle questions.
If you smoke then you will typically be charged more than a non-smoker for the same amount of cover. So if you smoke look for a company that doesn’t give different prices to smokers and non-smokers, for example, SunLife and British Seniors.
When does Life Insurance pay out ?
Life Insurance pays out when you die provided you die within the period for which your policy covers you. As we explained above, Term Life Insurance policies are designed to cover you for a specific period of time – say 10 years, whereas Whole of Life Insurance policies are designed to pay out when you die, irrespective of how long you live.
Depending on the provider you choose and the type of policy that you choose, the process for your family to make a claim under your Life Insurance policy can be anything from the same day, to several weeks if the insurance company requires various legal documents such as your Will, Death Certificate etc.
One absolutely key thing to remember is that if you choose to take a policy that has health and lifestyle questions then always be completely honest when you answer the questions. If you make a mistake or do not tell the insurance company about a condition you have, then you might not be covered and your family could end up not getting the payout that you were expecting them to.
Who gets my Life Insurance payout ?
This is entirely up to you. Insurance companies have a form called an Expression of Wish Form. This allows you to tell them who you want to benefit from the pay out on your Life Insurance policy should you die. We recommend that you always make sure that you have completed an Expression of Wish Form and that this is updated if you change your mind over time about who you want the pay out to go to.
By completing an Expression of Wish Form this means the money goes directly to those you name on the form and never becomes part of your estate, so it doesn’t count towards any inheritance tax thresholds. This is a complex area so we would always suggest that you seek professional advice if you think your estate may be more than the current inheritance tax threshold.
We also recommend that you write a Will. This is a legal document that determines where your estate goes after you die. It allows you to appoint a legal guardian for any children you leave behind and to appoint an Executor of your Will- this doesn’t have to be a solicitor but needs to be someone (or group of people) you trust to complete the instructions that you leave in your Will.
How easy is it to apply for Life Insurance ?
Applying for Life Insurance is pretty easy. If you go for a product with Guaranteed Acceptance you only have to fill out a really simple application form – name, address, date of birth, bank details, the amount of cover or premiums you want to pay and that’s about it – it will take you a matter of minutes and you can do it on the web in your own time.
Even if you go for a Life Insurance policy that has health and lifestyle questions then the process is pretty simple but does take a little longer. There are some companies that allow you to apply online with a simple set of questions that change depending on how you answer, and will give you an immediate decision on whether they can cover you and how much it will cost. Other insurance companies will want you to answer various questions and may then want to write to your doctor for a medical report before they are willing to make a decision and decide on the amount of your premium.
Whatever you do don’t let the process of getting covered put you off applying – it’s not a hard process and is for your family’s benefit after all !