U.K.: Don’t Pay Over The Odds If You Are Over 50

Helen Pridham asks you today in The Times, London, to be wary of the targeted life insurance policies that offer guaranteed acceptance LONDON, England (The Times), October 20, 2007: If you are aged 50 or over, the “special deals” that insurers offer your age group can appear attractive. But they do not always offer good value. With guaranteed-acceptance life insurance plans you could be paying twice as much as you need to. Yet there are a growing number of such schemes, with Post Office Financial Services being one of the latest entrants to the market. The main difference between these over50s schemes and ordinary life insurance is that there are no health questions to answer. The only information required is age, gender and choice of premium, typically starting at £7 or £8 a month. Although the cost appears low, many policyholders pay dearly for the convenience of the policies, says David Thomson, of BestDealInsurance.co.uk, the independent insurance adviser. “Consumers could easily get more life cover elsewhere,” he says. “Over50s plans are a cash cow for the insurers. How else can they afford the giveaways?” Normally sold direct to consumers through TV or press advertising – fronted by older celebrities, such as Gloria Hunniford or Cilla Black – the over50s plans offer free gifts to those who sign up and pay a few months’ premiums. The Post Office, for example, is giving away freeview boxes, digital cameras or wine. Other insurers, such as Engage and AXA Sun Life, offer DVD players and Marks & Spencer vouchers. Philippa Gee, of Torquil Clark, owner of Life Policies Direct, the independent protection adviser, says: “As soon as a company gives free gifts, you have to question the value of its policies. I do not know any advisers who recommend this type of policy.” Over50s plans are whole-of-life policies that pay out a fixed amount on death. As a disincentive to those in poor health taking out the policies, the full sum assured is not paid for up to two years, except on accidental death. The Post Office, for example, gives only a return of premiums if death occurs in the first 12 months, while AXA Sun Life and Engage give 150 per cent of premiums paid in the first two years. The marketing of the plans tends to give the impression that it may be difficult for older people to obtain life cover elsewhere. But Mr Thomson says: “This is not the case. Although older people are more likely to suffer health problems, it rarely prevents them from obtaining life cover. Even if they have to pay slightly higher premiums, they are likely to get better value than with an over50s plan.” Research by Direct Life, an adviser to insurance brokers, found that more than 60 per cent of people in their sixties are accepted for life insurance at normal rates. Some people choose over50s plans because they are fearful of having to undergo a medical. But these are relatively rare unless you want a large amount of cover. Jon Briggs, of Hargreaves Lansdown, the independent financial adviser, says that someone in his or her late fifties and in reasonable health would not usually be asked to have a medical unless more than £100,000 of cover was required. The difference in cost between an over50s plan and ordinary life insurance is striking, as figures from Liverpool Victoria, the insurer, show. Under its over50s plan, a 60-year-old man in normal health paying a premium of £50 a month would receive £9,336. Under the company’s ordinary whole-of-life policy, the same premium would buy him £19,434 of life cover. Ms Gee says that many people may not even need life insurance. “If people want to leave money to family or provide for a funeral, a better way is to invest the money,” she says. Another snag with over50s policies is that they have no cash-in value, so you receive nothing if you stop paying the premiums early. But if you continue, you can end up paying more than the total life cover. For example, a 65-year-old man paying £20 a month into an AXA Sun Life Guaranteed Over 50 Plan with a sum assured of £2,555 would have paid more than this in premiums after ten and a half years. The same sum in a cash Isa paying 6 per cent would be worth £3,265 after ten years. However, Kevin Carr, of Life-Search, the independent insurance adviser, is not against over50s plans and says: “They have a role if you are in poor health and cannot get life cover elsewhere.” But do shop around. For example, a 60-year-old female nonsmoker paying £20 a month receives £4,345 of cover from AXA Sun Life, but £5,557 from Engage. Called to account The crop of over50s savings accounts that has sprung up in recent years requires consumers to apply the same level of scepticism as they should with over50s life cover. For example, Abbey’s 50+ Bond, a three-year fixed-rate bond, pays 5.7 per cent. Yet the same terms are on offer to savers of any age who take out a fixed-rate bond with the bank. The top rate on an over50s nonotice account is 6.4 per cent from Coventry Building Society. Saga, meanwhile, pays 6.3 per cent on its Online Savings account, but this includes a bonus of 0.8 percentage points, which reduces after six months. However, the same rates are available on accounts available to savers of any age. For instance, Bradford & Bingley’s Internet Saver account offers 6.4 per cent, while Icesave Easy Access and the AA’s Internet Access account pay 6.3 per cent – and none of these includes a temporary bonus. CASE STUDY Christine Crease, of Mold, North Wales, recently purchased life insurance through BestDealInsurance to cover her mortgage when she bought a house this summer. The 50-year-old, left, pays £55.65 a month for her £145,000 term insurance policy from Royal Liver and had no objections to having to complete a detailed health questionnaire before taking out the cover. “I am recovering from an autoimmune problem and have to take antiinflammatory tablets for my joints and muscles, but there was nothing serious, so I did not need a medical,” she says. However, she has given up smoking and is hoping to obtain cheaper life insurance in a year’s time. © Copyright 2007 Times Newspapers Ltd.