Over 50s life insurance is poor value, claims Which
Over 50s life insurance plans sold with the help of free gifts and endorsements from daytime TV celebrities are a rip-off, claims consumer champion Which.
The cover is ‘incredibly bad value’ for most customers – and the deal gets worse the longer the customer lives.
Which is urging the Financial Services Authority to probe how the policies are sold, with customers often receiving no advice about the benefits or risks of the plans.
Over 50 life insurance cover aims to pay a cash lump sum on the death of the customer.
Generally, someone pays a set amount each month from the start of the policy until they reach 90 years old.
Providing the policy has been in force for at least two years and is fully paid up, the lump sum is transferred in to the estate of the person who has died.
Which explains most of over 50s life polices are cheaper than other life cover, but the drawback is they pay out less than the return of investing the same money in a savings account, like a tax-free cash ISA, over the same term.
Which worked out the figures for a 60 year old male non-smoker paying £15 a month in to an over 50s life insurance plan.
The average over 50s plan will pay £2,980 on his death, typically after 20 years – but he could have saved the same amount in a cash ISA in 13 years.
The longer he lives after 13 years, the worst the value of the plan as his ISA savings would continue to increase, but the policy would still pay the same cash lump-sum.
Often the attraction of over 50s plans is a ‘no medical’ guaranteed acceptance, but this does not male the plans good value.
Legal & General, LV= and Sun Life Direct – whose marketing features TV chat show host Michael Parkinson – are among the leading financial providers offering over 50s life insurance plans.