Life insurance can provide peace of mind that your loved ones will be looked after financially when you’re no longer around, but if you’re aged 60 or over, finding affordable cover can be a challenge.

Here, we explain how life insurance for over 60s works, which different options are available, and what to watch out for when buying cover.

How does life insurance for over 60s work?

When you buy life insurance, you pay a premium each month, and the policy will pay out a lump sum if you die during the policy term. However, there are several different types of life insurance policy to choose from, and all vary in terms of cost and how they work.

Term life insurance

Term life insurance gets its name because it provides you with life cover for a set period of time, or ‘term’. It’s often taken out alongside a mortgage, so that your payments will be covered in the event that you’re no longer around to make them. The older you are, the higher the monthly premiums for this type of life insurance will be, as statistically there’s a higher risk of you dying during the term of the policy. Premiums will also be higher if you’re a smoker or if you have been diagnosed with a medical condition such as heart disease or diabetes. If you survive the policy term, you won’t receive any of your premiums back. If you want to remain protected, you’ll need to take out a new policy, with premiums likely to be much higher as you’ll be older.

You’ll usually be offered three different types of payout when you take out term insurance. These are:

  • A level payout, where you maintain the same amount of life cover over the policy term
  • A decreasing payout, where the amount your loved ones would receive gradually reduces over time
  • An increasing payout, where any payout rises in line with inflation.

Insurers will also ask whether you want either guaranteed or reviewable premiums. If you choose reviewable premiums, these will usually start at a lower level but then increase gradually during the term of your cover. Guaranteed premiums, however, will be more expensive at the outset than reviewable premiums, but will remain the same through the term of your policy, so you won’t be hit by any sudden hikes in costs. You can usually only apply for a term insurance policy if you’re aged under 65.

‘Whole of life’ insurance

Whole of life insurance, as its name suggests, covers you for the rest of your life, which means a payout is guaranteed when you die. As a result, premiums are much steeper than for level term insurance. They will be especially high if you’re in your 60s, and even more so if you have any health issues, as you’re more likely to make a claim earlier than someone who’s in the peak of health. If you stop paying your premiums at any point, your policy will lapse and you’ll no longer be covered. 

This type of policy is often popular with people who want to avoid leaving loved ones with an inheritance tax bill when they die, as the proceeds of the policy can be used to cover this. If you want insurance for this reason, make sure you write your life insurance policy ‘in trust’. This means that the money that’s paid out by the life insurance policy can be accessed without probate having been granted and it isn’t liable for inheritance tax as it falls outside your estate.

Over-50s insurance

Over-50s insurance is a type of specialist life cover just for people in their 50s, 60s and beyond. Premiums for this kind of cover tend to be lower than for other types of life insurance, but the maximum payout from over 50s life insurance is usually pretty low, typically around £3,000-£5,000. 

Unlike other types of life insurance, you won’t be asked for your medical history when you apply for over 50s cover, so you’re guaranteed to be accepted. You’re also guaranteed a payout, as the policy lasts until you die.

This type of cover can be a good option for you if you’ve been turned down for other types of life insurance due to health conditions, or because of your lifestyle, for example if you’re a smoker. 

If you die relatively soon after taking out a policy, then your loved ones should end up with a lump sum that is worth more than the premiums you’ve paid in. However, if you take out this type of cover when you’re in your early 60s and live until you’re 80 or older, the chances are you’ll end up paying far more in premiums than the policy will pay out. Premiums are payable for life, and if you stop paying them for any reason, you can’t get any of your money back.

Bear in mind that if you die in the first year after taking out this type of cover, perhaps because you develop a terminal illness, the insurer might only pay you the premiums you’ve paid so far, rather than the lump sum payout, so make sure you read the policy small print carefully before buying. Learn more about over-50s insurance in our article Life insurance for over 50s explained.

Find out more about the various kinds of life insurance available to the over 60s in our guide What are the different types of life insurance?

What to watch out for

Whichever type of over-60s life insurance policy you decide to go for, it’s vital to read the small print before buying so that you’re clear on exactly what your policy will and won’t cover.

For example, if you’ve decided to go for over-50s life insurance, most policies require you to pay premiums every month for the rest of your life, but some say you can stop paying them once you’ve reached the age of 90. 

You should also check whether any policy you’re considering buying has a payout that will keep pace with inflation, or rising living costs. If it does, then your premiums will usually rise in line with inflation too. If it doesn’t, then the payout you’ll get on death might not look quite as generous as it does now a couple of decades on. 

You should also check whether the policy has a ‘qualification period’. If you die during this time, your loved ones will only get the premiums you’ve paid back for the policy so far, rather than a full payout. Qualification periods typically last for one or two years, but this can vary depending on which policy and insurer you choose.

How much does life insurance for over 60s cost?

The cost of life insurance if you’re over 60 depends on a range of factors, including your age, whether or not you’re a smoker or have any medical conditions, how much cover you want and the type of policy you want. It’s best to speak to an insurance broker to find out how much a policy may cost you considering your particular circumstances. 

However, as a rough guide, according to comparison website, an ordinary level term life insurance policy with a term of up to 10 years would set someone in their 60s back an average of £77.88 a month, which for many people will be unaffordable. For most people in their 60s and beyond, over-50s insurance is likely to be a much more cost-effective option.

For example, says that the average cost of an over-50s life insurance plan for someone in their 60s with £4,000-£5,000 whole-of-life cover is £21.42 a month, so considerably less than the premium for level term insurance.

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Alternatives to life insurance for over-60s

Savings rates have risen in recent months following a series of increases in the Bank of England base rate, so you might decide that rather than paying monthly insurance premiums, you’d prefer to try to build up a nest egg in a savings account.

That way you know that your loved ones will get back all the money you’ve paid in, plus interest, when you die. If you want to see the best easy access savings account and cash ISA rates, you can find these in our regularly updated article Best easy access savings accounts and Best cash ISA rates – which cash ISAs pay the most interest? 

Fixed-rate bonds usually pay more than easy access accounts, but you can’t withdraw money from this type of savings account before the term ends without penalty. Find more information about these accounts and the top rates in our article Fixed rate savings bonds explained.

How do you make a life insurance claim?

When making a life insurance claim, the first thing you need to do is contact the policy provider and let them know the policyholder has passed away. You’ll need to provide them with the policy number if you have it. The insurer will want to know your relationship to the policyholder, and their cause of death and they will also want to see an original death certificate.

If you’re planning to buy life insurance, it’s therefore a good idea to let your loved ones know that you have cover in place and where your policy documents are kept, so they can access this information quickly and easily in the event of your death.

Once the insurer has everything they need, they should then be able to process the claim. Payouts are usually made within about 5-10 days, but this will vary from provider to provider.

How to find the right over-60s life insurance for you

You should always get quotes from several different insurers before buying life insurance, so you can be certain that you’ve found the best possible deal to suit your needs. 

If you have any pre-existing medical conditions it can be helpful to use a fee free specialist life insurance broker to help you navigate the various acceptance criteria and find the right insurance cover for you.

As with all forms of insurance, make sure you are completely truthful when giving your answers to the questions on your life insurance application – for example your medical history – otherwise the policy could be invalidated.

You can find out more about the importance of life insurance in our article Why life insurance matters and about buying life insurance in our guide Where can I buy life insurance?

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