Life insurance for the over 50s
While lots of younger people take out life insurance when they buy a property, get married, or have children, there are also good reasons to take out life insurance later on in life if you haven't done before.
Looking after your dependants
Life insurance offers peace of mind that your family will be looked after financially, should the worst happen to you. And while many people take out cover when they are relatively young, if you didn't, you may decide it's worth doing later on in life if your family still depends on your income.
If you're the main breadwinner, are still paying off your mortgage, or are paying the majority of household bills, your spouse or partner may struggle without your current income. As the costs of living continue to rise, many children live at home for longer, and may remain financially dependent on you to some degree. Equally, if you are the main earner, your partner may rely on the pension contributions from your salary to help look after them in their retirement.
Guaranteeing an inheritance
If you're over-50 you may choose to take out life insurance to help your family meet the costs of any inheritance tax liable on your death. Without this, they may have to sell your property to pay for it, losing their home as a result. An increasing number of people are finding that they need to use the equity in their homes to cover their retirement living costs, or care home fees, making life insurance even more essential. Funerals can also be expensive, so an insurance payout could help your family cover these costs.
How to choose the right type of life insurance
How to choose the right type of life insurance Most life insurance policies taken out by younger policyholders are called 'term insurance', which covers a set time period decided by the policyholder – usually coinciding with the term of a mortgage, or the time when children are still dependent and living at home. Once the term has finished, the cover ends. If you're over 50, however, and want to make sure your policy will contribute to the inheritance you leave your family, you will probably want to look at a different type of cover called 'whole-of-life insurance'. You may even find specific policies targeted towards the over-50s, often with no need for a medical examination – although there may be a 'qualifying period' included of around 12 months during which the policy will not pay out the full sum insured if you die.
You will usually find that the monthly premium is guaranteed not to change but also that the lump sum paid out in the event of your death is also fixed, so is not tied in with inflation.
Consider writing your life insurance policy in trust
To make sure your dependants benefit as much as possible from your life insurance, you will want them to pay the least amount of inheritance tax possible. Consider writing your life insurance policy in trust, which means the policy falls outside of your estate for inheritance tax purposes. Inheritance tax is charged at 40% on bequeathed assets above the £325,000 threshold, so depending on your other assets up to 40% of the life insurance payment could get consumed by tax if the policy is not written in trust.
An extra benefit is that because your life insurance is not classed as part of your estate, the payout avoids the potentially lengthy probate process that your other assets must go through – so your family may receive the money more quickly.