The best Life Insurance for seniors and older adults depends on what you need a payout for. We often help clients in this age bracket arrange Life Insurance to:
- Pay for a funeral
- Meet an inheritance tax bill
- Pay off small debts, such as personal loans or credit cards
- Cover inheritance tax on certain gifts they make during their life
- Cover a mortgage if they pass away before repaying it
- Protect dependent family members with a lump sum if they die.
Life Insurance Options For Retirement And Beyond
There are four main types of Life Insurance for seniors to consider. All offer peace of mind in various ways, but which one you need depends on your desired end goals.
The four types of Life Insurance are:
Lasts for your whole life, paying a lump sum on your death, whenever that is. It’s useful for covering funeral costs or meeting an inheritance tax bill.
A set of interlinked Life Insurance plans to cover the potential sliding scale inheritance tax bill that might arise if you make certain gifts during your life and die within a set period.
Pays a fixed benefit if you die during the policy’s term. It pays out exactly the same amount in the first year as the last. It’s therefore a good option for family protection, where the need for cover is constant.
The payout falls over the policy’s term, reaching zero by the time it ends. It’s a good option to cover straightforward repayment mortgages, where the amount you owe and therefore the cover you need reduces with time.
What Type of Life Insurance Do I Need?
As mentioned, the above types of Life Insurance achieve different goals, so it can be hard to know exactly which senior Life Insurance will work for you.
We’ve broken it down into the best Life Insurance for seniors seeking cover for various different scenarios.
However, if you’re ever stuck or it’s all getting a bit confusing, don’t hesitate to pop one of the experts at Drewberry a call. We’re here on 02084327333.
Do I Need Funeral Cover?
For a guaranteed lump sum to cover funeral costs on your death, whenever that is, Whole of Life Insurance is likely your best option.
SunLife’s annual Cost of Dying Report places the cost of a basic UK funeral at more than £4,000. This covers a cremation or burial, funeral director fees and the cost of a minister / celebrant.
Meanwhile, the total cost of dying, which includes the above plus costs for a memorial, death and funeral notices, flowers, order sheets, a wake and other expenses, such as an estate administrator, tops £9,000.
You can choose to cover such costs with Whole of Life Insurance so your family doesn’t have to worry about finding this cash after you’re gone.
Do I Need Inheritance Tax Insurance?
Whole of Life Insurance will also likely be your best option to cover an expected inheritance tax bill for your loved ones.
This will usually be because you have assets to leave above the current inheritance tax nil-rate band. If so, HMRC could take a 40% chunk of most assets you leave behind over your available nil-rate band.
So your family won’t have to take the tax out of what you leave them, you can arrange Whole of Life Insurance. This pays out on your death to cover the entire expected bill.
Who Needs Gifts Inter Vivos Insurance?
Making a gift during your life is known as a gift inter vivos.
If you make a gift or gifts larger than your available inheritance tax nil-rate band, and it’s not an exempt gift, HMRC still considers it part of your estate for inheritance tax for at least 7 years (potentially up to 14 years) after you make it.
If you die within 7 years (and potentially up to 14 years) of making the gift, HMRC requires the recipient of the gift to pay inheritance tax.
The amount is on a sliding scale based on how many years you survive after making the gift, with less tax due over time.
For example, if you live for less than 3 years after making the gift, HMRC requires the recipient to pay inheritance tax at the full 40% rate. However, if you survive 6-7 years after making the gift, it falls to 8%.
What’s the Best Life Insurance for My Mortgage / Family?
Of course, many people seeking Life Insurance for the over-50s are still working. They could therefore have an outstanding mortgage, or a dependent spouse / civil partner (or even dependent children) to protect.
If you have costs such as a mortgage or want family protection, Term Life Insurance is likely your best option. This pays out if you die during a set term, for example before you repay your mortgage, or until your children are no longer dependent.
As above, you can either choose Decreasing Life Insurance or Level Life Insurance. Level Life Insurance, because the payout stays fixed over time, is more expensive than Decreasing Life Insurance.
How Much Does Life Insurance for Seniors & Retirees Cost?
Term Life Insurance, as it only lasts for a set term, is far cheaper than Whole of Life Insurance. That’s because Whole of Life Insurance guarantees a payout whenever you die.
The risk to the insurer is therefore 100% providing you keep paying the premiums, which the insurer prices to reflect this.
For this reason, clients generally cover much smaller amounts with Whole of Life Insurance — for example a few thousand pounds for funeral costs — than with Term Insurance.
However, this of course depends on what you need cover for. If you’re protecting a fixed inheritance tax bill, you’ll need enough for this.
What’s the Cost of Whole of Life Cover for the Over 50s?
The cost of Whole of Life Insurance depends on various personal and policy factors. For example, to price your monthly premium, insurers look at your:
- Required level of cover
- Age
- State of health
- Smoker status.
To come up with the below premiums, we’ve had to make a number of assumptions about the individual involved. For instance, we’ve assumed they are:
- Healthy
- Seeking £50,000 worth of cover
- Retired.
These Whole of Life Insurance premiums are the cheapest available for someone who meets the above criteria.
For Whole of Life Insurance quotes tailored to you, click here ⟶
Whole of Life Insurance premiums for over-50s are high, even for a fairly small £50,000 payout.
It’s also worth noting that the person paying the most, a 75-year-old smoker, would pay premiums for less than 152 months before paying the insurer more than their benefit is worth.
152 months is around 12 and a half years, so they’d be less than 88 when this occurs. If they were still alive, they’d need to continue paying premiums to secure the payout on their death.
What’s the Cost of Term Life Insurance for the Over 50s?
For Term Life Insurance, the cost of cover depends on factors such as your:
- Total chosen benefit
- Length of cover
- Policy type (e.g. level or decreasing)
- Age
- Health / pre-existing medical conditions
- Smoker status.
In the table below, we’ve put together some quotes for both Level and Decreasing Term Life Insurance for seniors aged 50+. To do this, we’ve made a number of assumptions about each individual. For example, we’ve assumed they are:
- Healthy
- Retired
- Seeking £100,000 worth of cover either on a level or decreasing basis until their 75th birthday.
The premiums in the table represent the cheapest Life Insurance quotes available for someone with the above characteristics.
For tailored premiums, compare Life Insurance quotes here ⟶
3 Ways To Reduce The Cost Of Life Insurance
Life Insurance has fewer adjustable policy options than other protection plans. This makes it harder to reduce the overall monthly premium with seniors Life Insurance.
However, if premiums seem too expensive, you could use following options to cut the cost:
- Quit smoking
If you go nicotine-free (including substitutes such as vaping / nicotine replacements) for 12 months, you can apply for lower premiums.
- Reduce your benefit
Carefully calculate your benefit. For example, if the plan is for a funeral and cremation is acceptable for you and your loved ones, it’s usually cheaper than a burial. Or if it’s for an inheritance tax bill, there may be inheritance tax planning opportunities to lower the bill while you’re still alive.
- Reduce the term
For term insurance, consider how long you’ll realistically need cover. The longer a policy lasts, the more it costs. Will you need a payout after your mortgage ends? Is cover to the maximum age essential or just nice to have? If so, you could reduce the term to cut premiums.
How Will HMRC Tax the Payout?
When you pass away, the value of all your assets forms your estate. If your estate exceeds your nil-rate band threshold, HMRC charges inheritance tax at 40% on everything above the nil-rate band.
For inheritance tax, assets include payouts from Life Insurance. The size of your estate could therefore be boosted significantly by Life Insurance, resulting in a higher inheritance tax bill.
For most people, this is the exact opposite of what they want. Why pay premiums for a benefit only for HMRC to take a chunk before your family gets it?
However, if you’re planning to use Life Insurance to cover your inheritance tax bill it would be even worse, having exactly the opposite effect you intended.
What About Specific Over 50s Life Insurance Policies?
Over 50s Life Insurance is a specific type of Whole of Life Insurance.
It’s slightly different in that many insurers offer guaranteed cover for anyone under a minimum age, regardless of your medical history, without needing a medical.
As insurers don’t ask about your health, they can’t use it to assess the risk and calculate your potential life expectancy.
The maximum benefit available is usually therefore much lower, and premiums usually higher in terms of the payout you get for your money, than cover which looks at your medical history.
Is Over 50s Life Insurance The Best Option?
This depends on your circumstances.
For example, if you’re in your early 50s, a non-smoker and healthy, you may be better off with a policy that looks at your medical history.
That’s because you’ll likely find you can get a higher benefit at a lower cost than with most Over-50s Life Insurance plans.
However, if you’re older, a smoker and / or in poor health, the lack of medical questions could work in your favour. Cover with an insurer that asks health questions will likely be more expensive for you than an Over-50s policy.
Insurers which assess your health also tend to offer higher maximum benefits as they can better price risk. For example, the maximum benefit on Over-50s Life Insurance is typically just £25,000.
If you need a higher benefit than this, then Over-50s Life Insurance is unlikely to work for you.
Over 50s Life Cover Policies Have Qualification Periods
Most policies have a qualification period — insurers also call it a moratorium or waiting period.
It’s a length of time at the start of the policy where it won’t pay out if you die. This might be 12 or 24 months.
Some insurers waive this if you die in an accident — for example a car crash — during this period rather than of natural causes. However, others won’t pay out for any death at all during this period.
If this happens, your loved ones typically get a refund of the premiums you’ve paid up until that point, but certainly not the full benefit you were expecting.
These qualifications period are not required on traditional life insurance policies where your cover is medically underwritten. As soon as your policy is live you are covered on a traditional plan.
Compare Best UK Life Insurance Providers For Seniors In 2024
There are more Term Life Insurance providers than Whole of Life Insurance providers. While every Whole of Life Insurance provider offers Term Life Insurance, not every Term Life Insurance provider offers Whole of Life Cover.
Best Whole of Life Insurance Providers
Although there are more Term Life Insurance providers, the Whole of Life Insurance market is still relatively competitive. There are a number of key players, such as:
- AIG
- Aviva
- Royal London
- Scottish Widows
- Vitality
- Zurich.
Best Term Life Insurance Providers
Meanwhile, the following insurers offer some of the best Term Life Insurance policies for seniors:
