Picking the right life insurance can provide a headache for even those who are diligent in their research. It can be tricky finding an affordable policy with all the necessary coverage, let alone trying to grasp the differences between policy types.
One key area which is notorious for tripping people up is within life assurance policies. But what is the difference between life insurance and life assurance? Life insurance pays out if you pass away, whereas life assurance pays out when you pass away and guarantees a pay out (assuming you keep up with your premium payments).
If you’re after life insurance, over 50, and researching both over 50s life insurance sometimes referred to as over 50 plans) and whole of life insurance, you may have issues distinguishing between the two. After all, they offer many of the same benefits.
However, whether over 50s life insurance is better than whole of life insurance is essentially down to an individual’s insurance needs, available budget and health.
Here are the similarities and differences between the two policies, helping you make an informed decision about your senior life insurance.
Table of Contents
The similarities
At a glance, both policies have striking similarities. For one, your monthly premiums are fixed on both policies. This means that the amount you pay each month will not change, providing you do not increase or decrease your cover amount.
These premiums will be paid up until the policyholders’ passing, at which point the beneficiaries will be able to make a claim for the assured sum agreed upon at the start of the policy.
Critical illness, defined as an illness which debilitates or severely hinders your quality of life, is not covered on either policy. The range of illnesses defined as critical is extensive and subject to each insurer but usually includes cancers, heart attacks, strokes and forms of paralysis, amongst others.
It is also possible to pay more into each policy than the pay out amount, depending on factors including the policyholders’ health and the age they were when they took the policy. Both types of policy would be cancelled however if the monthly premiums are not paid or once the policy holder dies.
Essentially, the similarities are so close, it would make you question if it’s worth just picking the policy with the cheapest plan. However, once you’ve scratched under the surface, you will be able to jump into what makes these policies truly unique.
Age Range
Over 50s life insurance, unsurprisingly, is designed for those aged over 50 years. The max capped age on an over 50s policy varies between providers but is usually either 80 or 85 years old.
Whole of life insurance can be taken out from the age of 18 however, meaning anyone between 18 – 49 would only be eligible for whole of life policies. However, they may be eligible for other life insurance products too.
As these policies are life assurance policies, pay outs are guaranteed regardless of the age the policy holder dies. However, policies are subject to an individual insurer’s terms and conditions.
Medical History
One of the first big differences is the impact medical history has on the policy. Over 50s plans do not require any medical history to be provided. There’s a reason it is also known as a guaranteed over 50s plan; those with a poor medical history or health will still have guaranteed eligibility to take this form of life insurance.
Furthermore, over 50s life insurance can include terminal illness cover, meaning that if you have a terminal diagnosis, you would still be able to take out a policy. Keep in mind that a waiting period applies on over 50s plans – usually between 12 – 24 months. This means if you pass during this time, your beneficiaries will not be eligible to claim. However, they would be entitled to a refund on all previously paid premiums.
This makes over 50s life insurance ideal for anyone in this age bracket experiencing health issues.
The cost and the max sum assured
Over 50s life insurance may seem like it has the edge if you’re applicable. After all, a policy that doesn’t require a medical history or be subject to an individual assessment would surely mean an easier process?
Well, with the lack of a required medical, over 50s life insurance, on average, is more hazardous to the insurer. Therefore, the assured sum that would be agreed upon will be significantly lower than whole of life insurance or any other type of life insurance.
In fact, because of the risk to the insurer, the assured sum that can be paid out will only be up to £20,000. This contrasts with whole of life insurance, where you can be assured up to £1million. While you may not need this much coverage, it is worth considering other offered assured sums if you need more than £20,000.
It’s not all doom and gloom, however. Monthly premiums are substantially lower to contrast the lower assured sum. The example in the table below from life insurance broker Reassured depicts how much of a difference there really is:
| Age | Over 50’s monthly premium | Over 50’s assured sum | Whole of life insurance premium* | Whole of life insurance assured sum* |
| 50 | £57.56 | £18,000 | £150.17 | £100,000 |
| 55 | £66.05 | £18,000 | £179.64 | £100,000 |
| 60 | £70 | £17,898 | £210.54 | £100,000 |
| 65 | £75 | £15,733 | £266.15 | £100,000 |
| 70 | £75 | £11,229 | £349.96 | £100,000 |
*Whole of life insurance policy based upon a non-smoker
As you can see, the cost of whole life insurance is significantly higher. It is possible to receive a cheaper whole of life insurance policy premium if taken out from a younger age. However, it is important to know that regardless of which of these policies are taken, it is possible to pay more into the life insurance policy then the sum assured.
Why take an over 50s or whole of life insurance policy?
While the answer to this is subjective, it’s imperative that you know your reasons for obtaining cover as well as how much is necessary to cover these aspects. Knowing your underlining factors should mean you’re able to lean towards a certain type of policy.
Over 50s life insurance is considered a good policy to cover funeral costs. A study by SunLife concluded that the average cost of a basic funeral is £4,056, while the average cost of dying is £8,864. Over 50’s policies usually includes enough money to cover a basic funeral and can leave some left over for professional fees and other send-off costs.
Anything left over may be able to go towards an inheritance or charity donation, depending on the policy holders wishes, or other costs to help the beneficiaries of the policy.
Because of the larger assured sum usually designated to whole of life insurance, these policies can cover all the above. However, they can also be designed to cover the costs of a mortgage, rent or other large debts that may have been accrued. Day to day expenses, including food and travel and other costs which beneficiaries may struggle with once the policy holder is passed are other popular uses for successful claims.
When it comes right down to it, which is better depends on why you took the policy out. If you’re within an eligible age bracket and any of the above are reasons for you wanting life insurance, you may want to investigate that type of policy further.
Joint whole of life insurance
It is worth noting that whole of life insurance can be taken out to cover more than 1 person.
Dubbed, a joint whole of life policy, these can save money by covering two people with only one application form and one premium.
For example, Reassured quotes non-smokers who are 50 wanting £100,000 of cover £183.02 in premiums for a joint whole of life policy, compared to £300.34 in premiums for two single whole of life policies.
While this is a substantial monthly saving, it is worth noting that only one pay out is made, usually when the first person on the coverage dies. The coverage is then terminated, meaning the second person may need to take an additional life insurance policy, and at a potentially higher premium to ensure coverage. Joint whole of life insurance can be a great option but may not offer enough comprehensive coverage for all.
But…which is better?
The truth is rather than one policy being better than the other, one policy is more likely to fulfil your individual needs and personal circumstances. The best option is to discover why you want life insurance, work out how much cover you require and find the cheapest monthly premiums.
If you’re still unsure, using a broker service like Reassured or Cavendish helps compare over 50s plans and whole of life insurance quotes. Furthermore, they can answer any additional queries you may have to help you make the right decision.
Due to different underwriting processes, prices can vary significantly between providers. So if you take away one piece of advice from this post, it is to compare multiple quotes as it could save your £100s.
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