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Beware over-50s' life insurance
Many waste a fortune so we've compared best buys
Updated 21 November 2023
Maths genius Carol Vorderman has put her face to it – but don't listen to what she's said about insurance. These adverts' caring voiceovers make SunLife's over-50s' life insurance policy seem simple, yet for many they're a seriously bad bet.
You wouldn't buy a lottery ticket if it cost more than the jackpot, but as I explain below, the millions of people with these types of policies risk doing just that. So in this guide I'll take you through how over-50s' plans work, what to watch for and the best buys if you decide they're for you.
Aged 50+? We've masses of tips, tricks and help in our 50 Money Saving Tips for Over-50s guide.
How over-50s' plans work
My normal call to arms is to plan for all future events so you might be surprised by how scathing I'm going to be about these policies. To start with, just look at the SunLife over-50s website with its glossy pic and deliciously simple sales pitch:
- It promises a fixed lump sum when you die – so there's no investment risk and you always know what your loved ones will get.
- If you're aged 50 to 85, you don't you need a medical so you're guaranteed to get a plan.
- The costs start at £3.70 a month, but what's paid out depends on your age when you sign up.
- If you die within the first year, you won't get a fixed lump sum. Instead you'd get back what you paid in, so a full refund. The exception to that is if you die in an accident (such as a car crash) you'd get the full lump sum due.
It also touts that among other things it's perfect for funeral planning, to alleviate the nagging worry of being a burden to loved ones.
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Four problems with the SunLife plan
So far, it's all sounding pretty marvellous – no surprise these plans are so popular. Yet, as I've said before, there are huge holes and risks in these supposedly 'simple' policies. It's not just SunLife, but as it's the main provider of these policies I'm focusing on it here.
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The maths doesn't add up
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I want to draw your attention to two key clauses that when put together contain a problem so noxious it needs to be shouted about…
You need to pay the premium for life or your plan will end and you'll get nothing back
You could pay in more than the cash lump sum paid out
Get its over-50s' plan and you need to keep paying until you die. There are no breaks, so you won't be able to stop paying, yet the lump sum paid out is fixed. So the longer you live, the more you pay, while the amount paid back remains static.
Evaluating these plans requires a bit of simple arithmetic, often not even calculator-worthy, so here goes...So let me make this loud and clear (you won't see this on SunLife's site for the £7 plan):
An average 65-year-old woman will pay in £1,848 and receive £1,193
An average 65-year-old man will pay in £1,680 and receive £1,193
And even if you went on and lived until 180, with SunLife you need to keep paying in – unless you pay more where your payments will stop at an agreed date rather than on death – although some over-50s' plans at least cap the pay-in at age 90 (see best buys below for more).
Of course, no one lives an average life, so factor in your health and the longevity of other members of your family to see whether you're likely to live for longer or shorter. The table below shows how much it costs and the payout rates for different age and price combinations – and remember: the older you are, the longer your life expectancy.
SunLife over-50s plan – how much it pays out
Monthly premium Fixed payout Age when amount paid in = payout Start paying at age 50 £7/mth (£84/yr) £1,816 71
£10/mth (£120/yr) £2,782 73 £30/mth (£360/yr) £8,912 74 £45/mth (£540/yr) £13,369 74 Start paying at age 65 £7/mth (£84/yr) £1,193 79 £10/mth (£120/yr) £1,802 80 £30/mth (£360/yr) £5,726 80 £45/mth (£540/yr) £8,538 80 Start paying at age 84 £7/mth (£84/yr) £368 88 £10/mth (£120/yr) £550 88 £30/mth (£360/yr) £1,735 88 £45/mth (£540/yr) £2,603 88 Correct as of November 2023.
Even with today's savings rates, if you put £10 a month in a top cash ISA with 5% tax-free saving, those starting at age 65 would have the payout amount saved up almost four years quicker.
Therefore, for many people, simply putting money in a top savings account each month is a better option.
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These plans lock you in
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Over-50s' plans are insurance schemes, so once the money is paid in, you can't get it back. A few years ago, I made a film for BBC One's Watchdog where I met 84-year-old Mary Vickers. She had two SunLife policies with a combined total payout of £2,740 – but she had already paid in £3,700 and needed to keep on contributing £22 per month for life, as cancelling means you lose everything already put in so no payout is due.
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Miss one payment and you get nowt
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It used to be a firm term of SunLife's policy that if you missed a payment you'd get nowt.
I've heard from many who'd been stung by this like one woman who tweeted me "HELP! Mum died two weeks ago and had a policy with Axa. Final payment was missed – as mum was ill. Now it's refusing to pay." Thankfully, MoneySavingExpert.com was able to intervene (see Axa pays up after Twitter appeal) at the time and managed to get the full lump sum. But many others didn't.
Now if you miss a payment, you've usually up to six months to pay back all the missed premiums and the policy will start. Yet if you die after you miss a payment, then nothing is paid out.So if you've got one – or you're thinking about getting one – best practice is set up a direct debit payment to make sure this doesn't happen.
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Inflation
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The amount you're going to get paid may seem decent when you take it out – but each year it's eroded by inflation. So what looks like a lot at the start risks becoming a sum that won't stretch far enough – possibly not even enough to pay for your funeral plan.
SunLife is well aware of this, which is why some existing customers have received letters over the years asking them to top up their payout by taking out new plans. Few providers do offer inflation-linked policies (see best buys) where the final sum increases (or decreases) with inflation, but the amount you pay in also goes up.
For example, with the inflation-linked plan from Sainsbury's Bank (provided by Legal & General) the lump sum payout increases each year in line with the retail prices index (RPI) level of inflation.However, the monthly premiums will also rise by RPI multiplied by one and a half. So, if you were paying £10 per month and RPI is 3% you'll start paying £10.45 per month the next year, rising to almost £15 per month by the tenth year.
Yet inflation has been high in recent years, and with RPI at 6.10% (as it was in October 2023), a £10 per month payment would become £10.85 per month.
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If you've poor health, play the odds and over-50s' plans can be lucrative
Although I've spent most of this guide so far ranting about the dangers of these policies, don't think every over-50s' plan is a nightmare for every customer. If you understand what you're doing and have weighed up the risks, you can win.
Let me be blunt: this means that if you're likely to die sooner than the average, these plans can be lucrative. For example, if you've an already diagnosed medical condition, or you're a heavy smoker or seriously obese, these plans can be a good gamble because you don't need a medical even though your life expectancy will be substantially lower.
If we take someone with poor health (non-smoker) at 65 who is likely to live until 70, they could take SunLife's £74 per month plan which would pay out £14,039, while they'd only have paid in £4,440 – they'd get a whopping gain of over £10,000. If they died during year three, they'd just get back over five times what they've paid. Not a sum to be sniffed at.
Therefore if these are for you, read on.
I've got a plan. Should I cancel?
Some people with plans (reading this with teeth gnashing) may be asking, "Should I cancel?". The answer isn't that simple, because if you stop paying now, all past contributions will be lost.
Clinical logic demands you ignore all previous contributions. Do the sums as if you had started paying today, and work out if you're likely to put in more from now on than it will pay out. Obviously, the more years you've been paying in, there will be less point in cancelling.
Over-50s' plans: The best buys
SunLife is the dominant market leader of these plans, and far from the best – both in cost and in favourable terms. All of the main policies require you to pay monthly, pay out a lump sum and don't ask for a medical.
As there's no one best provider – it depends on your age and how much you pay in – we've three steps for finding a policy.
Step 1. Get quotes from these insurers
We ran example quotes with several insurers, with these ones offering the highest payout for the lowest monthly premium. So they're are a good place to start. Most don't ask you to enter much information so getting a quote with each one should only take a few minutes. Some of the links go via a comparison site, which can help you compare policies...
Over-50s 'fixed payout' insurance plans (non-smoker, aged 65)
| Insurer | Payout on death (£10/mth) | Payout on death (£30/mth) | Age you stop paying | When eligible for full payout? (i) | Inflation-linked option? (ii) |
| Shepherds Friendly (via Howden Life & Health)* | £2,311 | £6,934 | 90 | After 24mths | No |
| Legal & General | £1,855 | £5,903 | 90 | After 12mths | No |
| OneFamily (via Howden Life & Health)* | £1,853 | £6,286 | 90 | After 24mths | No |
| Sainsbury's Bank | £1,815 | £5,900 | 90 | After 12mths | Yes |
(i) Immediate if accidental death. (ii) Inflation-linked accounts increase (or decrease) with inflation.｜Correct as of November 2023.
Step 2. Check to see if a comparison site is cheaper
Once you've got your benchmark quotes from the insurers above, if you didn't use Howden Life & Health*, it's worth checking the policies it compares to see if you can get a better deal.
Via our link you'll receive £85 cashback if you buy a policy, so it can beat buying it direct – just triple check the policy details are the same, as some insurers have lesser payouts if you go via a comparison site.
If you choose to buy a policy, the cashback is paid automatically into your bank account after the sixth monthly payment. Though it's limited to one policyholder per household. Note this is in addition to any insurer offers featured on the Howden Life & Health site.
Step 3. See if you can get cashback on top of the cheapest quote
Finally, take your cheapest quote (either direct or from Howden Life & Health) and check if there are any cashback deals from that insurer. Plus, if your second and third-cheapest quotes were similar prices, see if cashback's available for them too and find the overall winner.
Our Top Cashback Sites guide has full information and which sites to check, but in brief...
- Always check the insurance quote you get via a cashback site is as good as the original quote from a comparison site, as it can vary
- Cashback is never 100% guaranteed as there can be issues with tracking and allocating the payment – it's often a good idea to clear cookies on your device before using a cashback site
- Money held in your cashback site account has no protection at all if that company went bust. Always withdraw as soon as you're able to
How to complain about your insurance provider
The insurance industry doesn't have the best customer-service reputation and while a provider may be good for some, it can be hell for others. Common problems include claims either not being paid out on time or at all, unfair charges, or exclusions being hidden in small print. It's always worth trying to call your provider first, but, if not, then…
You can use free complaints tool Resolver. The tool helps you manage your complaint, and if the company doesn't play ball, it also helps you escalate your complaint to the free Financial Ombudsman Service.
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