Prepaid funeral plans vs over 50s plans – How could your client cover funeral costs?

Who should consider an over 50s plan?

An over 50s plan is ideal for people who:

• Would rather leave a cash sum to loved ones which could help towards funeral costs or other debts
• Have a smaller monthly budget, as funeral plan monthly payments tend to be more expensive
• Have found that other types of life insurance are too expensive due to a health condition or age, as an over 50s plan doesn’t require any medical information

Over 50s plans key pointers

As mentioned, over 50s plans are an affordable option for many people who want to leave some money to loved ones after they’re gone.

It’s especially ideal for people who are in their 50s, 60s and 70s who have experienced poor health and can’t afford traditional life insurance.

However, before your client signs on the dotted line, they should be aware of the pitfalls of this type of cover too.

One of the big questions to pose is whether an over 50s plan is worthwhile for a client who’s expected to live a long life, as they must pay premiums until they turn 90 or until they pass away (whichever is soonest).

For example, if a 55-year-old were to pay £20 a month and the fixed sum assured is £5,000, by the time they turn 75 years old they would have paid the total amount the policy guarantees to pay out.

The purpose of life insurance is to provide a cash pay out should the client pass away earlier than expected.

Obviously, they don’t want this to happen but that’s why it can be a gamble paying into one of these types of policies.

Your client will also need to consider that with most over 50s plans, they won’t be able to reduce the premium or cancel the plan at any time.

If they find they can no longer afford the premiums and stop making payments, then the policy will be cancelled and they won’t receive any money back.

Funeral cover with an over 50s plan (free benefit)

If your client is drawn to an over 50s plan but would like the pay out to be used for their funeral, then it’s worth looking out for insurers which offer the Funeral Benefit Option (also known as Funeral Funding) with their over 50 life insurance.

The funeral benefit option can be added on to a policy free of charge and ensures that their pay out will go straight to a funeral director instead of to beneficiaries when the time comes.

Insurers tend to provide an incentive for customers to make use of this option, typically by providing a small contribution towards the cost of their funeral.

When a client is deciding between a funeral plan and an over 50s plan, it’s important that they acquire personalised quotes for both options. This will help them to make a final decision as to which is the best option for them.

Sources

*SunLife (2022), Cost of Dying Report, sunlife.co.uk/funeral-costs

https://www.reassured.co.uk/funeral-plans/