Senior life insurance

Find out why getting life cover in your later years can be an affordable way to take care of the ones you love most. 

Find out why getting life cover in your later years can be an affordable way to take care of the ones you love most. 

Faith Archer
Insurance expert
7
minute read
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Posted 9 DECEMBER 2021 Last Updated 20 JANUARY 2022

What is the difference between regular life insurance and senior life insurance? 

Regular life insurance policies have a maximum age. This varies among insurance providers, but it’s typically between the ages of 50 and 80. The older you are when you take out a policy and the more health conditions you have, the more expensive it can be – especially if you want a fixed, lump sum pay-out. Regular life insurance policies usually only run for a set time period, for example, between five and 30 years. If you survive this term, your beneficiaries won’t get a pay-out when you die. 

Senior life insurance, as the name suggests, is specifically designed for those in later life. Rather than expiring after a set term, senior life insurance policies run for the rest of your life, as long as you keep paying the premiums. This means your beneficiaries will get a guaranteed pay-out when you die. And unlike most regular life insurance policies, you won’t need to undergo a medical or answer questions about your health. 

These over 50s policies are typically cheaper than regular life insurance policies, but also tend to pay out distinctly smaller sums. The older you are when starting the policy, the smaller the pay-out will be. 

What options are there for life insurance as I get older?

Your options for life insurance as you get older include: 

  • Whole of life insurance Also known as whole life assurance. This pays out when you die, no matter what your age. You select the pay-out amount at the outset, after which you pay a monthly premium. Providing you continue to pay your premiums, when you die the policy will deliver the pay-out to your family. This means it can be expensive as the policy definitely pays out. 
  • Over 50s life cover This type of cover, which is usually taken out between the ages of 50 and 80, pays out a modest lump sum to your dependants when you die. It can be used to help your family cover financial costs, including unpaid bills and funeral costs. One advantage of an over 50s plan is that you’re guaranteed to be accepted – you won’t need to pass a medical or answer any health-related questions. With many senior life insurance policies, you’ll need to keep up the payments every month or your family won’t receive anything, although some policies do stop charging once you hit a certain age or have contributed for a set number of years. This does mean that if you live a long life, you could end up forking out far more for the policy than any pay-out after your death. 
  • Funeral cover Many providers offer pre-paid funeral plans. Some of these only cover the funeral director’s bill, while others could include the cost of a wake or a cemetery plot, so do check the small print to be certain about what’s included. By using a prepaid funeral plan, you may be able to lock in some of your funeral costs at today’s prices, rather than leaving your loved ones to pay higher costs after you die.  
  • Level term insurance This pays out a fixed lump sum, which is agreed when you take out the cover, if you die during the term of a policy. If you don’t die within the policy term, your family won’t receive a pay-out. This type of policy can be an expensive option if you start it in later life. 

Why might I need senior life insurance?

You may not need senior life insurance after reaching 65 if you’re sure the estate you’re leaving will secure your family’s financial future, even after any inheritance tax. But if you’re not confident about that, you might want to consider life insurance for the following reasons: 

  • Passing on a legacy Life insurance for over-65s could be a way to make sure that when you go, you leave a tidy sum for your family.
  • To cover your funeral costs Many people take out life insurance in later life to pay for their funeral costs. Considering that even the most basic funeral can cost around £4,056**, it’s one way to cover your send-off without financially burdening those you love. 
  • Cover for inheritance tax Some people worry that inheritance tax might wipe out part of the legacy they leave to their family. For estates worth more than £325,000, a tax of 40% is applied to the remaining amount, although the threshold before inheritance tax is due pushes up to £500,000 if your estate is worth less than £2 million and you leave your home to your children or grandchildren in your will. For example, if your estate is worth £550,000 and your leave your home to children or grandchildren, then your loved ones could face a £20,000 inheritance tax bill. Whatever the potential tax due, you may want to take out a life insurance policy to cover the amount.  
  • Outstanding mortgage If you take out a mortgage in your 40s or 50s you might still be paying it off in your 60s or 70s. Senior life insurance could help chip away at the balance or cover some of your mortgage repayments
  • Other debts You might have other outstanding debts like a personal loan. The pay-out from a life insurance policy could help your remaining spouse or partner tackle those debts. 

**SunLife Cost of Dying Report 2022

Did you know?

In recent years, there’s been a clear trend of mothers having children in later life. Compare the Market’s own research on the changing age of UK parents shows a massive 71.9% increase in women giving birth over the age of 45 in 2018 compared to 2000. This means that many parents will still have children who rely on them financially, even when they’re well past retirement age. Senior life insurance could contribute towards university costs or provide a small nest egg for your children if you’re no longer around to provide for them. 

How does age affect the cost of life insurance?

As you get older, life insurance typically gets more expensive. That’s because as people age, they’re more likely to pass away and therefore more likely to claim on a policy. Providers pass on this added risk to customers in the form of higher premiums. 

There are many other factors apart from age that affect the cost of life insurance. Your health, weight and lifestyle – including if you smoke or not – all impact the cost of cover. There are steps you can take, such as quitting smoking or improving your fitness, to reduce the cost of your premiums. 

Use our life insurance calculator to find out how much cover you might need.  

Is critical illness covered by senior life insurance?

Critical illness cover typically pays out if you’re diagnosed with a serious illness listed in the policy. A critical illness can include, for example, a stroke, heart attack or non-terminal cancer. The cover pays out in the form of a lump sum, which will be tax-free if you paid for the policy, rather than your employer. 

Critical illness cover can be added to run alongside a life insurance policy. A combined policy provides just one pay-out– either when you’re diagnosed with one of the conditions listed or when you die – whatever happens first. If you want a pay-out for both, you could also buy critical illness cover as a separate, stand-alone policy. 

Just be aware that some insurance providers won’t cover pre-existing medical conditions – issues you had before taking out the policy. 

Read more about what is and isn’t covered by critical illness insurance. The type of policy that works best for you will depends on your individual circumstances. 

Am I able to take out a senior life insurance policy for my parents?

You can, if you can show that you’d suffer financial loss if they died. For example, if a mortgage (or other debts) would be passed to you or if you’d have to pay the funeral costs. This is called having an ‘insurable interest’. It’s needed if you buy life insurance for someone else. Unsurprisingly, this can be a sensitive topic and you’ll need the full consent of your parent or parents before getting a policy. 

Should I place my senior life insurance in trust?

A way to protect your beneficiaries from paying inheritance tax is to write your life insurance policy in trust
 
If your life insurance policy is in trust, it won’t be considered part of your estate when you die, so it won’t be subject to inheritance tax. It also means your beneficiaries should receive the money sooner, potentially in weeks rather than months, as it won’t need to go through the probate process. You can also specify in a ‘letter of wishes’ how you want the money to be used – for example, to pay for your funeral costs. 

Top tips when taking out senior life insurance 

Your reasons for taking out life cover may change in later life, turning to legacies, funeral costs and inheritance tax rather than childcare, but it may still be possible to find affordable options: 

  • If you’d like your loved ones to benefit from a life insurance policy after you’ve gone, consider taking one out as soon as possible. Premiums tend to go up as you get older and more ill.  
  • Always be 100% honest and ‘fess up to any pre-existing medical conditions when applying, even if it makes life insurance more expensive. Otherwise, your policy might be invalid and your family might not get any pay-out at all.  
  • Don’t fancy intrusive medical questions? You could opt for an over 50s plan. However, if you lead a long life, you could end up paying far more in premiums than any pay-out. 
  • Remember, you don’t have to take out life insurance to leave a legacy or cover funeral costs. You could squirrel the money away in savings, with the flexibility to use the cash yourself later on, if you really need to.
  • Do consider writing any life insurance policy in trust. Most people don’t own enough to worry about inheritance tax, but a trust can mean your nearest and dearest get the money much quicker, without it being delayed by probate.   
  • Keep your policy paperwork in a safe place and make sure someone else knows where to find it when you’re not longer around. 

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Frequently asked questions

Is the coronavirus pandemic affecting life insurance?

It’s still possible to buy life insurance, but there may be a few COVID-related questions to answer during the application process. Coronavirus isn’t one of the standard exclusions for most policies, so you should be covered if you die from the virus.

Find out more about life insurance and coronavirus.

Can I still get senior life insurance with a pre-existing condition?

Yes, you can, but it might affect your premiums. If you’re considered a ‘higher risk’, your premiums might be more expensive. That said, most insurance providers will assess applications on a case-by-case basis, so it could depend on the severity of your medical condition. Your provider might not change the premium at all or they might choose to exclude that condition from your cover – in which case your premiums might even fall. 

Criteria and exclusions can vary among providers, so it’s a good idea to shop around to see what options are available.

 

What is a moratorium period?

When you take out a life insurance policy, there may be a waiting period before your cover actually starts, so you can’t just fill in the paperwork on your deathbed. Depending on the insurance provider, this could be 12 or even 24 months after the start of your policy. This means that if you die during this period, your family may not receive a pay-out.

Can I cash in a senior life insurance policy early?

No, you can’t. Your beneficiaries will only receive a pay-out when you die. Senior life insurance policies don’t have any cash-in value. So, if you stop paying your premiums, you won’t get the money back and your policy will be worthless, no matter how much you’ve paid in before.

What is the ‘benefit amount’?

The benefit amount is the maximum amount of money your life insurance will pay out when you die. This can vary among insurance providers. Typically, you should expect to pay higher premiums each month if you want your policy to pay out a larger benefit amount.

How long do I pay for senior life insurance?

It depends on how old you are when you take out the policy and the type of cover you buy. Some whole of life insurance providers stop your payments once you hit a specified age or have paid premiums for a set number of years, even though the cover will continue up until you die. 

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