Almost the entire UK population is now aware that we live longer than ever before.
This means more and more people are planning financially for longer life.
Ensuring we have the finances to cover funeral costs, pay off outstanding debts, and take care of loved ones once we are gone can bring a great sense of wellbeing and security.
Along with peace of mind, this means that whatever happens, you can ensure your bills are covered and family well looked after.
However, the amount of cover you receive will depend entirely on the policy type you choose.
How do you know which policy to select?
Living costs are increasing, including household bills, and then there are the cost of funerals, and inflation to consider.
Life expectancy has risen by 10 years since the 1970s, with average age ranges from 79.5 years for men and 83.1 years for women.
Over 70 insurance cover is now a must and can be beneficial for people who have never had cover and those who have had cover, but it has expired.
We’re going to take a look at your options and what each one can mean for you below.
The most common policy types available
Below we will discuss the three main policy types available for over 70s.
Over 50 plans
- Over 50 plans provide cover for a specified sum assured (pay-out amount)
- Acceptance is guaranteed for UK applicants aged 50-85
- No medical information is required.
Over 50s plans are the most well-known type of life assurance. Monthly premiums are paid and upon your passing, a pay-out is made to your chosen beneficiaries.
An over 50s plan lasts for the rest of your life, which makes it a form of life assurance.
With this type cover, the pay-out is guaranteed when you die rather than if you die within a specific time period. This is the main difference between over 50s plans and life insurance.
Although no medical information is required, the risk you pose to the insurer is still taken into account when figuring out the cost of your premiums.
Your age and smoking status are two key factors that will be considered before a decision is reached.
With some over 50 plans, once you reach 90 years old, premiums cease but cover remains in place until your passing.
Considering the cost of your premiums up until you reach 90 years old is a must, as it’s possible that you could pay more into the plan than the payout amount.
You should also consider the qualifying period. All over 50s plans have a qualifying period of between 12 and 24 months.
If you pass away due to natural causes during this time, there will be no pay-out. However, premiums that have been paid will be returned.
Death caused as a result of an accident is still eligible for a successful claim.
The pay-out your beneficiaries receive can be used how they wish, whether this is covering the cost of your funeral, providing an inheritance, or something else…
Monthly premiums can vary significantly between insurers, so comparing quotes is absolutely key.
The whole of Life Insurance
Whole of life insurance can be a good option if you’re in your 70s, and even more so if you are in good health.
- Greater cover amount (vs over 50s plans)
- Has medical questions on application
- Pay-out is guaranteed.
This type of assurance is well suited to those in later life who don’t have medical issues.
The whole of life application involves health-related questions and possibly a medical exam, unlike the over 50s plan.
By providing accurate details of your medical history and having a medical exam (as long as you have no health issues) you may get the same level of cover as an over 50s plan, with a lower premium.
In fact, it is possible to get 40% or more cover than the guaranteed over 50 plan.
That being said, the cost of your monthly premiums is still calculated based on the level of risk you pose to the insurer.
Premiums will likely be costly as your risk will be deemed relatively high.
This is because:
- You’re more likely to have suffered a medical condition
- You’re at higher risk of developing a future medical condition
- The older you are, the shorter your life expectancy.
This may be the best option if you want to leave an inheritance, depending on your budget.
Whole of life is a type of life assurance meaning that when you die, your beneficiaries are assured a pay-out, similar to the over 50s plan.
However, whole of life premiums will continue until the day you die, rather than stop once you reach 90.
Just like with an over 50s plan, this means that it’s possible to pay more into the policy than your loved ones will receive as a pay-out.
As a result, you must do the calculations beforehand to ensure it’s the right option for you.
This kind of cover may be suitable for covering funeral costs, clearing debts, and providing inheritance to loved ones and dependants.
However, the pay-out can be used in whatever way the inheritors deem fit.
- A good choice if you only need to cover the cost of your funeral
- £4,271 is the average cost of a funeral (source: SunLife)
- Applicants of any age are accepted
- Various payment options available
- Lock in today’s rates, (avoid rising costs).
A funeral plan is a good choice for anybody of any age who simply wants to cover the cost of their funeral.
Bear in mind that in some instances, only the funeral director costs are covered. Reading the fine print and going with a reputable company is essential.
A pre-paid funeral plan accepts anybody of any age, and your selected plan won’t differ depending on your age, as the price is set by the current rate of a funeral.
This is beneficial in that, regardless of the rising cost of funerals (currently 122% since 2004), you’ll pay no more than today’s rate when you are accepted.
However, whilst age isn’t a factor in terms of cost, it may affect the length of time you have to pay into the plan.
There are different payment options available:
- One-off payment
- 12-monthly interest-free payments
- Low-interest instalment payment plan
For those ages 70 and above, the one-off payment and 12-monthly interest-free payment options are likely to be available.
An instalment plan may not be an option. The instalment plan can be set anywhere between 2-30 years.
If you are offered to pay in 12-monthly interest-free payments, you’re likely to be accepted if you’re over 70.
However, if you die within the 12-month period, the remaining balance will need to be covered by your loved ones, so keep this in mind.
A funeral plan can be beneficial as you will not be leaving your loved ones with the burden of planning your funeral and covering the costs at such an emotionally charged time.
You can also let them know what you would like in regard to the ceremony, rather than leaving them to make the tough decisions once you are gone.
A funeral plan will not be used as inheritance and will only cover the cost of your funeral.
This option is therefore not suitable for anyone looking to cover outstanding debts or leave an inheritance of any kind.
Some funeral plans only cover the cost of the funeral director, and not third-party fees such as venue hire and minister fees.
Looking into various aspects included within a funeral plan when making your selection is important, and you will want to compare a wide variety of those available.
Determining your own funeral ceremony and being able to lock in today’s rate are the key benefits of selecting this type of plan.
Questions to ask yourself
Receiving the correct cover is essential and can make the difference between leaving your loved ones with debts, no inheritance, and a funeral to plan, or everything covered and taken care of for them.
Asking the right questions can help you to make sure you take out the right cover.
Below you’ll find some suggestions:
- Are you just looking to cover the cost of your funeral?
- Do you want to leave an inheritance to your loved ones?
- Do you have outstanding debts you would like to clear?
- Do you need to pay off the mortgage?
- Do you need to provision for the future living costs of your partner?
- Do you have any other dependants?
- Would you like to exercise more control over your funeral ceremony?
- Do you want to cover just the cost of the funeral director, or third-party fees also?
You can do numerous things with a pay-out, including protecting an inheritance for loved ones, cover inheritance tax fees, and ensure your family can clear the mortgage in your absence.
Considering how they will have to rearrange their lifestyle once you are gone and what they may struggle with will help you to select the appropriate plan.