Often a topic we prefer to keep personal or potentially in the shadows all together: life insurance. This is a contract between an insurance policyholder and an insurer: the contract will state that the insurance holder exchanges a premium (periodic payments) for a lump sum of money to be paid to the family or associates (dependants) in the event something unfortunate happens to the policyholder, like death or critical illness. This resource will hopefully inform you of how to get term life insurance if you’re over 50.
What are your options?
There are three types of cover that companies have to offer:
- Level term insurance
- Decreasing term insurance
- Increasing term insurance
Level term insurance
Level term coverage means that the policyholder will pay an agreed premium for a certain period of time and if they are to pass away within that period, the insurer will pay a fixed sum of money which was agreed at the beginning of the contract to the dependants of the policyholder. The payout for an insurance coverage like this normally ranges between £100,000 and £200,000 and may cost you around £30 a month depending on your current health, if you smoke etc.
Of course, the payout will stay the same whether or not the policyholder is at the start of a mortgage plan or the end, for example. This type of coverage can give you the confidence that in the unfortunate event something happens to you, your family and associates won’t have to struggle to pay for your funeral, children’s school fees or mortgage on top of the grief, or whatever financial commitments you possess.
You can also often add ‘critical illness cover’ meaning if you do become critically ill, your dependants can receive the monetary contributions for the difficult period.
Decreasing Term Insurance
If you decide to go with this option, the payout will decrease as you progress through the policy.
Why would you take out a decreasing term insurance?
Usually somebody would take out this type of cover if their aim is specifically to pay off financial commitments such as a mortgage because for one the premium will be cheaper and seeing as the payout decreases with time it will normally match the mortgage value so you know it will always be paid off if you pass away, which is also going to be decreasing as you pay more towards it. This type of cover is usually cheaper than a fixed term plan and it will still ensure that your loved ones don’t have to stress about your financial commitments in an already difficult time.
Increasing term insurance
This is designed to match and compensate for inflation and other rising costs of living, the payout will normally increase by a certain percentage each year or similarly it will be mirrored to the Retail Prices Index (RPI) measure of inflation. This type of cover is really relative to people who have a larger budget as premiums will be higher.
Most policies have an option to add ‘critical illness cover’ this implies the insurer will pay the agreed sum before death, in the event that the policy holder becomes critically ill.
Another option most policies have is dual coverage, i.e. the policy holder and their partner, business associate or family member can be covered on the same policy. This means that if either one of them dies, the other or their dependents will be paid. Typically this is cheaper than taking out two separate policies.
Things to consider when choosing a policy
Of course the older you are, the more expensive your premium will be as you are thought to be more vulnerable to passing away.
You need to think how long you want your cover to be because this will affect your premium i.e. if you are buying it to cover your mortgage maybe you only want it for the duration of the mortgage.
You could also study the economy or speak to a specialist and decide if you believe there is going to be a spike in real GDP. This could determine whether or not you would like to choose an increasing term insurance.
Honesty is key with your insurer as well, if you have previously had health issues or smoke the insurer must know. It will increase your premium but if you are to die the insurer will investigate all the information and if they find a discrepancy the policy will be invalidated and they won’t pay out.
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