Is Life Insurance Still An Asset For The 50+?

Is Life Insurance Still An Asset For The 50+?

Most people start families in their 20s or 30s and this is also the first time they think about family protection, life insurance and making sure that their loved ones are taken care of if they die.

Once this life cover is purchased, it is common to forget all about it and only review it every couple of years when a review of ones finances is due.

Decades later, when your circumstances have changed and your family has grown up, it might be tempting to question whether a life insurance policy is necessary at all.

However, cancelling a policy might involve hidden costs. This blog post is a quick guide to the possible pitfalls of cancelling your policy.

Changing Circumstances

If your children are over the age of 18 or a substantial part of the mortgage is paid off, there might be little reason to keep your policy.

It seems rather obvious to say, but if you cancel your policy the first thing you will lose is the cover it offers.

If you need to take out a future policy for any reason, you will find it far more expensive in terms of monthly payments than the original agreement.

Some policies are designed to pay for the cost of schooling and university education of children if a parent dies, but this might seem redundant if your children are now grown up and have left home.

You might also find that you still need a life insurance policy as grandchildren could become dependents and the financial future of your partner might be in jeopardy if you pass away.

It might be that if you died over the age of 50, your partner could still be several years away from retirement age, and may therefore be dependent on an additional source of income that a policy could provide.

What are the savings?

If you cancel your life insurance policy you will save the cost of the monthly contributions and in today’s economic climate this could well be ready cash you can’t do without.

However, whilst you might be making savings to your financial plan in the short term, the financial risks to your family dramatically increase if you were to unexpectedly pass away.

Life insurance in many ways is a far wiser investment for families with less disposable cash than others, as the financial pressures on wealthier families in the event of bereavement will be lesser.

Lower Insurance Premiums

Cancelling a policy outright is not the only option open to policyholders facing financial difficulties.

It might also be possible to agree with your policy provider to pay a reduced contribution (see ‘Other Options’ 3rd sub heading) in return for a lower level of cover for a period of time until your financial situation improves.

Most UK life insurance policies have no charge for cancellation, but if you do cancel and then re-apply for cover, the increased cost of a new policy will act as an unofficial penalty.

Protecting My Family

One possible way of spreading the costs of life insurance is to look at the cover both you and your partner have.

When you initially took out life insurance cover, you might have decided with your partner to take out a joint policy. Normally they cost less than two separate policies and are a lot easier to set up.

However, if you have two separate policies, it might be worth exploring whether taking out joint cover is more cost effective.

Much of this will depend on the age and relative health of both policyholders, but the good news is that nearly all over 50s are accepted on to new life insurance policies, (see ‘Guaranteed Acceptance’) without the inconvenience of a medical.