Senior life insurance options in a post-COVID world

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Since 2011, there has been no set retirement age in the UK giving the population the freedom to choose when they would like to retire. But with many losing their jobs and struggling to make ends meet because of the COVID-19 pandemic, many have had to make the difficult decision delay their retirement.

An article in The Guardian describes how many UK residents at retirement age are putting their retirement savings on hold as a direct result of the COVID-19 pandemic (which saw 124,000 over 50s unemployed and 1.28 million placed on furlough, 181,600 of which were over the age of 65).

The Coronavirus pandemic highlighted the need for financial protection and, combined with the increasing state pension age (which now stands at 66 but will be increasing to 67 in 2028¹), securing life insurance later in life has never been more important.

But what options on the life insurance market are available to those aged 60 and over?

Award-winning life insurance broker, Reassured, help explain the senior life insurance options…

What is life insurance?

Life insurance is a policy that will pay out a cash lump sum to your loved ones in the event of a worst-case scenario.

You choose a sum assured (how much you would like paid out), pay a monthly premium and, if you pass away during the policy term, your loved ones will receive a cash pay out.

A life insurance pay out can be used to cover financial commitments to ensure your loved ones can continue their current standard of living.

Commonly this includes mortgage or rental payments, family living costs, funeral costs or it can be left as an inheritance for loved ones to spend on whatever they deem fit.

Why do over 60s need life insurance?

The UK population are now living longer than ever, with the Office of National Statistics predicting female life expectancy to be 83.1 years and male life expectancy to be 79.3.

Taking out life insurance during your 60s or 70s ensures that your loved ones are protected throughout your later years.

Reaching your 60s can often spark a huge change in life, the mortgage may be paid off, the children will probably have grown up and moved out, you may think about downsizing, and retirement is just around the corner.

Life insurance can provide peace of mind that your loved ones will be protected no matter what the future holds.

What senior life insurance options are there?

There a number of life insurance options available to those aged 60 and over. Personal circumstances such as your age, health and wellbeing as well as what you would like to protect and your available budget, will dictate what option is best for you.

Over 50s plan

An over 50s plan is specifically made for those aged 50 – 85, guaranteeing acceptance with no need to provide any medical information. Instead, insurers will take into consideration your age and, sometimes, your smoking status to calculate your premium.

For those in their 60s, who have struggled to get cover due to their age or medical history of do not require a large sum assured, an over 50s plan can be an ideal option.

As insurers are unaware of the risk you pose, over 50s plans come with some limitations. For example, most insurers will only offer a maximum sum assured of up to £20,000. While this amount could cover funeral costs it doesn’t leave much left for an inheritance.

An over 50s plan is also likely to come with a ‘waiting period’. This refers to the first 12 or 24 months of the policy where if you pass away due to natural causes, no pay out is made. However, any premiums paid into the policy will be refunded to your loved ones.

Term life insurance

A term life insurance policy will provide cover for a predetermined period of time (the term) and if you pass away during this time, a pay out will be made.

Term life insurance typically comes with level (pay out sum remains fixed) or decreasing (pay out sum reduces over the policy term) terms.

Due to the large pay out potential with a level term life insurance policy, it is well suited to covering aspects which do not decrease in value over time. This could be an interest only mortgage, family living costs or leaving an inheritance.

Decreasing term life insurance, on the other hand, is better suited to a repayment mortgage or providing a smaller inheritance. This is because the pay out sum will reduce throughout the policy lifetime.

During the application process insurers will require you to provide key information such as whether you smoke, your medical history, your weight and your age. As someone in their 60s, depending on your circumstances, this could be a costly option.

Whole of life insurance

Whole of life insurance guarantees a pay out to loved ones when you pass away (not if). This actually makes it a form of life assurance.

Again, you will need to provide the insurer with key information during the application process. You will also be required to pay premiums for the remainder of your life to keep cover in place.

If any high-risk factors are identified during the application process (such as a pre-existing medical condition) this option is likely to become expensive if paying inflated premiums for the remainder of your life.

However, if you are still in good overall health, a whole of life policy may be a better way to guarantee loved ones a pay out as you can secure a higher sum assured than with an over 50s plan.

Funeral plan

A funeral plan is an alternative to life insurance for those only wanting to protect loved ones from rising funeral costs.

This type of policy will provide the funds to pay for your funeral. You’ll pay for the key services for your funeral in advance (either in full or in instalments) and when the time comes the funds will be paid directly to the funeral director.

This is often a popular choice for those over 60 as it allows you to plan your funeral the way you would like it, while alleviating your loved ones of the financial obligation of paying for your funeral.

The main benefit of a funeral plan is that it allows you to pay for your funeral at today’s rate. Funerals have steadily been increasing in price each year, with the price of a basic funeral now at £4,184² (the highest it’s ever been).

Applying for life insurance in your 60s

Applying for life insurance in your 60s is no different to applying for life insurance at any other age. The only difference may be what you what the policy to cover. At this time in life, the mortgage may have been paid off and the kids may be financially independent – meaning the level of cover required may not be as high as it once was.

When applying for life insurance, there are a few policy extras that should be taken into consideration:

Terminal illness cover – Terminal illness cover often comes as standard with most term policies on the market and will provide an additional layer of protection by allowing an early claim in the event of a diagnosis of a life-threatening illness. The pay out can be provide peace of mind that your financial affairs are in order.

Critical illness cover – Critical illness cover can be added to a life insurance policy for an additional cost, or it can be purchased as a standalone policy through some providers. It will provide a cash lump sum upon a life changing illness diagnosis. This sum of money can help to fund private medical treatment, pay for carers or replace any lost income.

Writing your policy in trust – This process will allow loved ones to avoid inheritance tax (charged at 40% over the £325,000 threshold) and the probate process – resulting in a full and fast pay out.

It’s a common concern for those in their 60s that insurers will require a medical examination during the application process, but this is a rare occurrence. Insurers will only request a medical if extreme high-risk factors are identified.

If you have struggled to take out life insurance on standard terms, an over 50s plan offers the chance to secure life insurance without the need for medical information or a medical exam.
Over 60s life insurance in summary

• There are a number of life insurance options available to those in their 60s to plan their financial future
• An over 50s plan will allow you to secure cover without the need to provide medical information
• If taking out term or whole of life insurance, it’s unlikely you’ll be asked to undergo a medical exam
• If looking to simply protect your loved ones from funeral costs, you may want to consider a funeral plan
• Write your policy in trust to avoid 40% inheritance tax for your loved ones
• Comparing quotes ensures you secure the right policy at the best available price

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