Do you need different life insurance cover when you get older?

The type of life insurance that suits you best generally depends on your age.

For people with young families and substantial mortgage commitments, it makes more sense to look at term life insurance, which runs only for a fixed period – long enough to last until children leave home, for example, or until a mortgage is paid off.

But life insurance can still have an important role to play even if your children no longer depend on you financially or you now own your home outright.

What is life insurance and do I need it?

Millions of families rely on life insurance products to provide financial support on the death of a loved one.

Life insurance pays out a lump sum if you die and provides a financial cushion for your partner and dependents.

Those who fail to take out cover after buying a property with a partner risk leaving their loved ones unprotected – and saddled with any outstanding mortgage and running costs of the family home.

Life insurance policies for the over-50s

The main type of life cover aimed at the over-50s is known as whole-of-life insurance. Such policies guarantee to pay out when the customer dies, as opposed to term insurance which only pays out if the death occurs before the policy’s expiry date.

Whole-of-life insurance means that your family will get a payout when you die: this can be invaluable when it comes to helping cover funeral expenses, for example, or even inheritance-tax bills.

How whole-of-life insurance policies work

With this type of insurance, your family or other named beneficiaries are guaranteed a payout provided you pay your monthly premiums in accordance with the policy’s terms and conditions.

In some cases, premiums have to be paid for the rest of the policyholder’s life, while in others, they only need to be paid until a certain time, for example for the first 30 years or until the customer’s 90th birthday.

What are the different types of life insurance policy available? 

Fixed and variable premiums and life insurance

Some policies guarantee that premiums will never rise, while with other whole-of-life deals, you may face increased costs at a later date.

Such policies normally have some form of investment element: the provider invests the premiums you pay in order to generate enough capital to make the payout you want. However, if these investments perform badly, customers may see premiums rise.

Check before you sign up which type of policy you are buying.

Life insurance and eligibility checks

Unlike term insurance, whole-of-life policies do not usually require detailed medical checks. Eligibility is usually just based on age. For example, you might need to be between the ages of 50 and 75 or 80 to sign up.

Life insurance issues to bear in mind

As with any financial product, you should check the small print carefully. Find out what would happen if you died soon after the policy was taken out: it is typical that providers will limit payouts within the first year unless the policyholder’s death is the result of an accident, for example.

Bear in mind also that any eventual payout may be less than the sum of the premium payments you have made while the policy is in force.

What happens if you die without leaving a will?

Term assurance versus whole of life insurance

Life cover can last either for a set term, such as the life of a mortgage, which is referred to as “term assurance”, or it can continue for as long as the policyholder wants, known as “whole of life insurance”.

The amount of money paid out depends on the level of cover you buy and other factors which include age, health and occupation. You can also decide how it is paid out and whether it will cover specific payments, such as mortgage or rent.

Alternatively you can look to buy a decreasing term policy which sees the amount to be paid out drop over the period of cover. If you simply want to protect your family from debt repayments, perhaps a mortgage, the amount of cover will fall in line with the amount owed on the loan.

Joint life cover is available by buying two single policies. If anything happened to both lives, both policies would pay out.

What happens if a family member dies and leaves lots of debt behind?

Read more about planning and paying for a funeral

With life insurance, honesty is the best policy

You need to take time over the application to ensure you mention any medical conditions. If something is left out it can invalidate the policy.

Medical life insurance is available for people living with pre-existing medical conditions, but it’s likely to be much more expensive.

Life insurance to keep the family home

If your earnings are needed to service some or all of your mortgage repayments, the people you live with might no longer be able to afford to live there if you were to die.

There are special kinds of life insurance – often called term insurance or mortgage life insurance – which are designed to run for the length of a mortgage. 

These typically reduce the amount of cover over time as your outstanding mortgage debt falls.

How long do you really need to keep old paperwork?

Life insurance to support your children

Having children is one of the most common catalysts for buying life cover, given their reliance on both of their parents’ time and earnings.

However, while in the past our offspring’s financial reliance might have ended when they left home, current pressures on younger generations mean parents may be needed to offer support well into adulthood. As such, it may be worth looking at policies which offer extra years’ cover.

Life insurance, domestic work and care

Life insurance isn’t just for people who work. One common mistake is to fail to insure the life of the partner who is responsible for bringing up children, caring for relatives and other valuable domestic work.

Even the death of a non-earning spouse can have a significant financial impact on a family – and they should consider life insurance as just as big a priority.

Life insurance to protect your pension

In many couples, pension provision is not equal and one partner – most commonly, the husband – tends to have a higher level of pension income. 

In some cases, their other half may continue to receive payments even after their death. But if there is no provision for spousal cover in your pension, you could look at life insurance as a way to fill the gap.

Life insurance to cover tax bills

Life insurance in later life can also be a good way of helping your family deal with any inheritance tax bills that may be due on your estate.

You should also seek expert advice on having your policy written in trust.

Generally, payouts from life insurance held in trust are not subject to inheritance tax, and they can be made without waiting for the probate process to be completed.

Crucial things to remember when choosing a life insurance policy

* The younger you are, the cheaper the policy – so don't delay in buying it.

* Consider writing the policy in trust to help avoid inheritance tax.

* Check with your employer if you have death in service benefits. This will cover you for a multiple of your salary and you may not need additional life insurance. But remember that this expires when you leave the company.

* You need to look at policy coverage and extras within the cover to ensure you are getting the best value for money and the best coverage.

* It’s also important to establish the level of cover you need. The basic rule is to have enough cover to pay off your outstanding debts, as well as setting aside a certain amount for dependents too.

* When choosing the policy, you should also consider whether you would like to receive an early pay out in the event that you are diagnosed with a critical illness.

* Life insurance is often bought and held for its entirety. However, just like other kinds of insurance, it is possible to switch and save on premiums. You might even find a policy with improved terms while you’re searching for the best deals. But there are potential risks with switching, as any health changes along with your age will affect new premiums.

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