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Do you need funeral insurance?

Do you need funeral insurance?

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If you are thinking about funeral insurance what are some of the considerations you might want to take into account?

Over 50 life insurance

  • funeral insurance is also known as over 50 life insurance – and for good reason, too, since the name helps to make the point that it is worth thinking about maybe earlier than you thought;
  • 50 is no age at all these days of course, so it might seem odd to start thinking about funeral arrangements at such a tender age – as may become evident, however, there are very good reasons for doing so;

The benefits

  • over 50 life insurance may be called funeral insurance simply because the benefits eventually paid out are frequently used to cover the costs of commemorating your life and arranging your burial or cremation;
  • but there is no obligation for the proceeds to be used in this way – instead, like any other life insurance, the settlement may be used to help your family or dependents through any financial difficulties that might follow from your death;
  • this insurance is aimed at people who have been refused life insurance elsewhere (for example, due to a pre-existing medical condition). All applicants have a guaranteed acceptance and do not need to undergo a medical;
  • where you decide that you want to link your over 50 life insurance to a funeral plan, however, some providers offer additional incentives for your choosing to do so – by increasing the amount paid over to your funeral plan provider, for example;

How does this insurance work?

  • providing your policy premiums are up to date, this insurance pays out whenever it is that you die;
  • the amount that is paid to your nominated beneficiary is determined at the outset and guaranteed throughout the period until you die;
  • the amount of the sum you may insure is typically determined by your age when the insurance commences, and the sum you pay in monthly premiums – the more you pay each month, the bigger the payout, of course;
  • the term of the over 50 plan is typically until you die, or until you reach a certain age. This depends on the individual policy;
  • since your commitment is to paying those premiums for the remainder of your life, it is important that you are comfortable with the sum you choose, since it is not possible to cancel the plan and if payments stop, the cover terminates and nothing is paid out;
  • in accordance with advice published by the Association of British Insurers (ABI), providers of over 50 life insurance make clear that, because of the way the cover works, it is possible that the sum total of the premiums you have paid over your lifetime might in fact exceed the amount that is eventually paid out;
  • although the amount of life cover you choose guarantees the sum to be paid out upon your death (provided all the premiums have been paid), it is also important to remember that its final value may be worth less than it is today – once the effects of any inflation have been taken into account;

Moratorium

  • over 50 life insurance policies typically include what is referred to as a “moratorium”;
  • if you die within the initial stages of the policy – say, within the first two years – the full amount of the assured cash sum may not be paid out;
  • instead, many providers offer the return of all premiums that have been paid during that initial period and some then increase the amount repaid by up to 50%.

Having understood how this type of life insurance works and taken into consideration the factors influencing its relevance to your particular circumstances, this form of funeral insurance may be a helpful way of funding your last wishes or for leaving your designated beneficiary a cash settlement.