There are few people who wouldn’t benefit from some form of life insurance. If you are confident that the estate you’re leaving to your beneficiaries will see them through your funeral and allow them to live a comfortable life – after inheritance tax has been taken – you may not feel you need life insurance over 65.
However, if you're not in such a position here are a few reasons why you might want to take out life insurance for over 65s.
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Life insurance for over 65 with no medical exam or questions
Insurers have designed this policy for those who want their next of kin to benefit from a relatively low payout to help settle debts or expenses they have incurred, or as a gift.
It is often used to contribute towards funeral expenses. The cost of your funeral is deductible from your estate when considering inheritance tax, but it is still an expensive event – even at the modest end. An over 50s policy can help relieve some of the financial pressure that funerals can have on your loved ones.
For a maximum payout of £10,000 (depending on age), you might consider Over 50s Life Insurance with Post Office. This guarantees acceptance for UK residents aged between 50 and 80.
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Leaving a legacy for loved ones
If you’ve spent the majority of your life taking care of your own finances and are now in a position where you're comfortable, your thoughts might turn to how you can look after the next generation – or the one after that.
Life insurance for over 65s can provide this, and there are two types of cover that might appeal to you depending on how much you want to pay and how much you want to leave behind:
Level and increasing cover are term life policies, which means that they exist for a finite length of time and pay out upon the death of the policy holder within this timeframe. You can either decide the size of the payout you want and use that as the basis for your monthly premiums, or you can decide how much you want to pay each month, which will in turn dictate the size of your payout.
These policies aren't specifically designed for people buying life insurance for over 65s and are instead intended to be in place for longer periods of time. With Post Office Life Insurance, the cut-off age for buying such a policy is 70. Other insurers will have other upper age limits.
If you want a large payout from this kind of policy, you can reasonably expect premiums to be higher. However, if you want a payout in excess of £10,000, then these policies are worth thinking about.
You might well be asking what the difference between level and increasing term cover is. Level term cover is where your payout amount remains static throughout the life of your policy. £50,000 at the beginning of the policy will still be £50,000 when the policy is paid.
Increasing term, however, maintains the value of your payout in-line with inflation. Therefore the sum increases over time, giving your policy the same real-terms value as when it was taken out. Your premiums will also increase periodically over the course of your policy with increasing term. Policies designed to cover long periods of time are most affected by inflation. For the same amount of cover and policy holder, level term policies may be cheaper than increasing term.
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Covering inheritance tax
You might be worried about the effect that an inheritance tax bill will have on the legacy you leave to your loved ones. On estates over £325,000, the tax is 40% on the surplus. Therefore, an estate valued at £500,000 will be liable for £75,000 in inheritance tax.*
This is a considerable sum, particularly if your beneficiaries are less financially secure and have specific uses in mind for the money and assets you are leaving them.
Some people take out a life insurance policy that covers this sum. In the above example, you may want your policy to pay £75,000. Your monthly premiums would be worked out on this basis.
It’s important to note that term life insurance policies are also influenced by your individual circumstances, including health, lifestyle, age, profession and more. Therefore, if you are hoping to take out life insurance when you are 65 or over, you might find that your premiums are higher than they would have been a decade before.
*These figures are illustrative examples and should not be used as a basis for financial decisions. While we try to ensure our content is up to date, changes to tax rules may be implemented before we have updated our pages. Professional financial advice should be sought for any queries you may have about inheritance tax.
Taking an honest look at your finances is the best way to decide whether or not you would benefit from a life insurance policy. If you are 65, then you might be soon to retire. What are the benefits that you will forgo when you leave work? An example, if your employer provides this, is your death-in-service benefit which usually pays up to four times your salary should you die while in employment. Without such a safety net, would your partner or children have enough money to continue with life as they know it? Now that you can withdraw your state pension, will it cover your family sufficiently if you were to die, or will they need a little extra?
By calculating as accurately as you can what your loved ones can expect to receive when you die, as well as factoring in your debts and expenses, you can arrive at a figure that you may need.
The right life insurance for you will depend on what you need cover for, how much you need and over what period. Use our calculator and enter a few details to see how much cover you may need.
