Over 50s life insurance: is it worth getting?

What is over 50s life insurance in the UK?

Over 50s life insurance is a product promising a lump sum when you die. It's not medically underwritten and provided you pay the premiums, it'll pay out. 

So what's the catch?

The problem is, it can pay out less than you have paid in premiums. Which?, along with many other financial experts, does not advise buying this kind of product.

That’s not to say people over 50 should not have life insurance. With many couples having children in their 40s and people approaching retirement age still with mortgages, life insurance for the people over makes perfect sense. 

But it's important to understand the important differences between over-50s life insurance and standard life insurance - which is also available to the over-50s.

We examine what an over 50s life insurance policy is, how it works and whether alternatives might be better so you can decide the best life insurance for you.

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• Find out more: how does life insurance work?

Is it worth getting over 50s life insurance?

Most people would be better off not taking out over 50s life insurance. 

With over 50s life insurance you must pay the premium until you die. If you stop paying you get nothing back. 

Crucially, it won’t take long before the amount you will get back is less than you have paid in. 

At that point, you would have been better off sticking the money under your mattress, so even a simple savings account would be better.

If you need life insurance to cover a mortgage or to provide for your family, consider getting a standard term insurance product underwritten based on your age, health and lifestyle. 

If you want to leave something for your family, consider setting up a junior Isa for children or grandchildren, or making tax-efficient gifts.

• Find out more: Can I have multiple life insurance policies?

What's the best life insurance for over 50s?

There are two main types of life insurance.

Whole-of-life cover pays out an agreed amount whenever you die, providing you continue paying the premium (some policies stop taking money when you reach 90).

Term insurance covers you for a fixed number of years (the term).

With term insurance you get three main choices:

1. Decreasing term life insurance is usually tied to a debt, such as a repayment mortgage, so the amount paid out if you die during the term reduces as your monthly repayments reduce the total amount owed 
2. Level term life insurance pays out an agreed fixed amount if you die during the term
3. Increasing term life insurance means the amount paid out if you die increases during the term, usually in line with a measure of inflation (CPI or RPI)

You can then choose between receiving a lump sum and getting a monthly payment – called family income cover. 

Because family income cover will only pay out the monthly amount until the end of the term, the total the insurer will pay out reduces over time, so this is a cheaper product.

• Find out more: what is income protection insurance

Critical illness cover

You may add critical illness cover (CIC) to life insurance, or buy it as a separate stand-alone policy. 

This pays out if you are diagnosed with one of a list of 100 or more diseases or conditions. The key to watch out for here is the severity required before payments are made. Expert advice may help.

It may also be worth considering buying separate critical illness cover. There will be a difference if you need to claim for critical illness and later die within the life insurance term. 

A combined policy that pays out for critical illness may then reduce the final sum paid out on death. Two separate policies would pay out more in total.

Terminal illness

Many life insurance policies also include a terminal illness clause, which triggers the policy if you are given less than 12 months to live. 

This allows you to put your affairs in order and make sure your family is looked after before you die. The full amount is paid out at once, and you do not have to pay any back if you outlive the doctors’ expectations.

• Find out more: life insurance with cancer explained

Premium calculations 

Life insurance is priced based on your age, health and your lifestyle. The older you are, the more expensive. 

Any pre-existing medical conditions that risk shortening your life, add to the premium too. 

And your lifestyle choices – if you smoke, how much you drink and whether you do any dangerous activities – can all top up the premium further.

Guaranteed acceptance life insurance

It is also possible to buy non-medically underwritten guaranteed acceptance life insurance if you cannot get standard cover, but it is more expensive again.

Tax

Life insurance payments are not taxed, but may be added to the value of your estate and subject to inheritance tax. 

However, you can put your life insurance in trust to avoid this. It’s a simple form to complete.

How much does life insurance cost for over 50s?

The main factors raising premiums for life insurance are age, health and lifestyle. 

The older you are when you take out life insurance the higher the premium. Over-50s pay more than 30-somethings. 

Many people may have developed medical conditions or health problems by the time they get to 50, pushing premiums higher. So even though many will have given up smoking and ceased dangerous activities, premiums are going to be higher.

However, for most people over 50 a standard life insurance policy still trumps one marketed as an over-50s policy. 

In early 2023 we got quotes for a 53-year-old non-smoker in reasonable health:

• £5.59 a month for standard life insurance - a £10,000 term policy that runs until you turn 90, according to LifeSearch
• £5 - £75 a month for over-50s life insurance - but the starting payout for lower premiums is far below £10,000, according to Legal & General

In this case, standard life insurance is likely to work out cheaper for the same level of payout.

• Find out more: life insurance with diabetes explained

Where can I buy life insurance?

Many providers offer policies direct from their own websites, such as Legal & General, Aviva and Vitality. 

Most price comparison websites, such as MoneySuperMarket, Compare the Market and Uswitch, offer life insurance. 

You can use an independent financial adviser who might already be providing you with other financial advice and products, such as savings, pensions and mortgages. 

Or you can turn to a specialist life insurance provider, such as LifeSearch, that focuses exclusively on life insurance and has direct contact with underwriters. 

Key questions to ask before buying life insurance

Ask yourself the kinds of medical questions you can expect and prepare your answers. You will be asked a set of about ten questions and if you answer 'yes' to any of them you will have to provide more details, so have those details ready.

1. The first set of questions are ‘have you ever?’ and ask about major diseases such as cancer. 
2. The next set ask about ‘the past five years’ and cover medical conditions such as high blood pressure. 
3. And then there are the ‘in the past 12 months’ questions covering GP treatments and hospital visits.

You will also need to detail your lifestyle, not just whether you smoke and how many units of alcohol you drink, but any dangerous activities you undertake – that even includes seemingly mundane things such as riding a motorbike.

Also work out how much cover you actually need and how long you will need to have life insurance in place – called the term. 

Will you need the same amount of cover in place for the whole term (level term), or would it be ok for the amount of cover to decline (decreasing term) or do you need it to grow (increasing term)?

But also work out what you can afford and whether you will be able to afford it throughout the term of the policy. If you cancel life insurance, it simply stops – you do not get any money back.

• Find out more: Joint vs single life insurance policies - which is best?

What are the alternatives to over 50s life insurance?

If you do not need a standard life insurance policy but want to have a lump sum for funeral expenses or for your family, consider a savings account. 

You could also look at buying a pre-paid funeral plan – in 2022 these became regulated by the Financial Conduct Authority.