Should you cancel over 50s life insurance due to inflation?
Over 50s life insurance provider Scottish Friendly have spoken to 1,000 of their customers and 22% are considering cancelling their policy. The main reason for this is saving money during the UK cost of living crisis. Constantly rising prices in the UK have led to many people struggling financially.
Thousands of people in the UK have found it harder and harder to afford their monthly bills. This is mainly due to rising prices for essential outgoings like electricity and gas. This is especially true for those who are retired and on a fixed income.
Life insurance might seem like an expense you can do without, with cancelling a quick fix to lower your monthly budget. You simply stop your cover temporarily, with a plan to rebuy a policy later. There are some important things to think about if cancelling your over 50s life insurance though. It’s best not to be hasty or rush into any decisions about your policy.
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Scottish Friendly Statistics
Scottish Friendly have published these figures from their customer survey (over 50s life insurance customers:
- 1 in 5 (22%) of over 50s were thinking of cancelling their life insurance
- 28% of women were considering cancelling their over 50s life insurance
- 17% of men were considering cancelling their over 50s life insurance
- 57% said they took out their policy to cover the cost of a funeral
- 46% said they took out their policy as financial support for their loved ones
- 9% said they took out their policy to help their loved ones repay their mortgage
What is life insurance for over 50s?
If you are over 50, you can access special life insurance policies that have extra benefits attached. These policies are designed for people between the age of 50 to 80 years old.
Reasons to choose over 50 life insurance compared to a standard life insurance policy include:
- Guaranteed acceptance for cover: you can get life insurance with no medical questions, helpful for people with pre-existing medical conditions. Your family (or other beneficiaries) are also 100% guaranteed to receive a payout of the full sum assured in your policy.
- Fixed premiums: you can budget more easily as the monthly premiums (cost of your policy) will never increase. You are also covered for the rest of your life with no need to ever get another policy.
- Leave a legacy: you can leave a small monetary gift for your loved ones via your policy. This will be alongside covering funeral costs (the main purpose of over 50s cover)
- Funeral benefit option: some insurers will provide extra funds towards paying for your funeral. Legal and General for example will pay out an extra £250 if you add funeral benefit to your cover.
There are a wide range of UK insurance providers that sell over 50s life insurance such as:
Why are people cancelling their over 50s life insurance?
Inflation is having a huge impact on the price of products and services in the UK. People over the age of 50 are among those who have been finding it harder to afford their bills as prices continue to rise. In fact, many retirees have chosen to return to work as they cannot afford to live on their pension alone anymore.
When prices are high, it makes sense to try and reduce monthly expenses where you can. Scottish Friendly have stated that 28% of women and 17% of men they surveyed are thinking about cancelling their life insurance to cut costs.
What is inflation?
You may have seen rising inflation mentioned consistently in the news in the last year – but what does this actually mean?
Inflation is the way that financial experts measure the impact of rising prices on the UK economy. If prices of goods and services are high, so is inflation. Measuring inflation allows experts to make financial predictions about the future of the UK economy. Inflation in the UK is 10.4% now, as of February 2023.
The International Monetary Fund has recently predicted that interest rates (and inflation) should drop by the end of 2023. This should ideally ease some of the financial pressure on UK residents.
Unlike other types of life insurance, you can’t ‘inflation proof’ over 50s life insurance. Other policies allow you to have increasing cover. This means you can raise the amount you are covered for (£s) over time as prices in the UK rise (e.g., funeral costs). Your monthly payments would increase but so would the value of your cover.
This helps your policy keep its value, but you generally can’t get increasing cover for over 50s policies.
How to cancel over 50s life insurance
If you think cancelling your policy is the right choice for you, there are a few things you will need to do.
- Cancel your direct debit with your bank or building society
- Contact your life insurance provider to officially cancel your policy
Should I cancel my over 50s life insurance policy?
This ultimately is up to you. It is a good idea to think carefully before rushing to cancel your policy though. Remember:
- If you cancel your policy and stop paying, there is no guarantee you will find the same level of cover again for the same price. You could end up paying more if you rebuy a life insurance policy later on – even with the same insurer.
- You will lose any money you have already paid into your plan, and you will leave yourself with no cover if anything were to happen to you. This means having no funeral plan in placeor additional financial support for your family.
You can also choose to review your policy or switch to a new provider, rather than leaving yourself completely unprotected. Although you might benefit from short term savings, not having life insurance could lead to your family struggling financially at a later point.
If you’re struggling with the cost of your life insurance policy, you can get more FREE advice from an independent insurance expert.