Why Over 50 Plans Are Not Always Good Value
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But thousands of older people are not necessarily getting the best cover for the premium they pay or in the worst cases, they are paying in even more than the plan will ever pay out.
Therefore, it is absolutely vital for anyone interested in these types of plans to be aware of the alternatives before committing themselves. The reason for this: it may be possible to secure better cover from a different provider or you could get far more cover for the premium you pay with alternative policies.
How do Over 50s plans work?
They are open to anyone aged over 50, for a set premium that you pay every month until the day you die or turn 85 or the age specified within the policy and offers a fixed lump sum. The cover doesn’t usually start until after the first two years contributions but this differs from policy to policy. Many people are attracted to these policies because you don’t need to answer any medical questions.
This is similar to a Whole of Life Assurance plan. This is a life assurance plan that guarantees to pay a fixed lump sum as long as you pay the premiums every month until the day you die.
The difference being that the Whole of Life plan pays out from day 1 and for the same premium can potentially provide a much greater fixed sum on death.
So which is better for you? Much will come down to age and your health. The younger and healthier you are the better the Whole of Life option is for you. While you may have to answer a few more medical questions, the benefit of this is that you get personal underwriting and therefore potentially a lower premium for the same return as the Over 50 plan or greater cover for the same premium.
When you look at the cover people get for the lower premiums, £5 or £10, most of these policies do not provide enough to cover today’s costs, let alone what a funeral will cost when you die – estimated by Moneyfacts at around £4,000.
The problems arise if you are having health issues etc. But you should get independent financial advice to ensure you get the appropriate cover for your individual circumstances.