Martin Lewis thinks life insurance can play an important part when it comes to protecting your family financially, however his review of over 50 life insurance is quite scathing. Whilst he believes an over 50 plan could be lucrative for some, he does have four main concerns where he feels customers could be caught out.
So, what does Martin Lewis say about over 50 life insurance and should we share his concerns?
Who is Martin Lewis?
Martin Lewis shot to fame as the renowned people champion ‘the money saving expert’. He’s a journalist, tv and radio presenter, successful campaigner of all things money related and founder of UK consumer website moneysavingexpert.com.
What does Martin Lewis think about over 50 life insurance?
Martin Lewis has four main concerns when it comes to over 50 life insurance:
1. You could pay more into the plan than the cash sum paid out.
Premiums on over 50 plans are payable for life, or until you are 90. Therefore, depending on how long you live and therefore how long you pay into the plan, there is a chance you could pay more than the cash sum paid out.
Whilst Martin Lewis is right to highlight this point, this is life insurance in place to cover a risk, just like home and car insurance. The difference with life insurance for over 50s is that it’s guaranteed to pay out a cash sum to your family when you die.
And the risk works both ways. Whilst you could be paying into the plan for many years, you are covered for the full cash sum after a minimum period of 1 or 2 years.
So, for example if you were to die after 3 years having only made 36 monthly payments, the full cash sum would be paid out regardless.
2. You are locked into the plan
If you cancel your policy, you will no longer be covered for the cash sum and no money will be refunded.
This is an insurance plan, not an investment plan that can be cashed in. So, you need to be comfortable with the amount you pay each month and the length of time you may be paying it.
3. Miss a payment and you get nothing
Previously if you missed a monthly payment your plan would be cancelled and no money refunded, however these days there is more flexibility. Now some over 50 plan providers give you a period of grace or payment holiday if you are struggling to keep up with your monthly payments. Whereas others offer the option to reduce the amount you pay.
This will in turn reduce the size of the cash sum paid out, but if it makes the plan more affordable, it may be a better option. As mentioned, the main thing is to choose a monthly premium you are happy with at the outset.
4. Inflation will reduce its value
Martin Lewis’ final concern about over 50 life insurance is that as the cash sum is fixed, inflation will reduce its value.
Again, these days insurers offer more choice when it comes to offer 50 plans. If you want to keep costs to a minimum, then a fixed plan may be more affordable but as the money saving expert points out, you need to be aware that the value of the cash sum will be eroded over time.
Alternatively, some plan providers offer policies that increase in value annually, however this also means that your monthly premiums increase too.
When does Martin Lewis think over 50 life insurance could be a good idea?
Although Martin Lewis thinks over 50 life insurance can offer poor value for money, he believes it could be a good idea for some over 50s.
With an over 50 plan you are covered for the full cash sum after an initial period of 1 to 2 years, regardless of how much you have paid in premiums. Therefore if you are in poor health or feel you may have a shorter life expectancy, then Martin Lewis thinks you could benefit from this type of policy.
Are his views on over 50 life insurance right?
The points Martin Lewis raises about over 50 life insurance are valid. At the end of the day if you are in relatively good health and happy to go through a longer application with medical and lifestyle questions included, then regular life insurance could be more suitable as you could get more life cover for your money.
However, if you’re looking for life insurance that is quick and easy to arrange with no questions asked about your health and lifestyle, then guaranteed over 50 life insurance could be right for you.
Compare over 50 life insurance