The State Of Over Fifties Life Insurance Cover
Right now, it would appear that at the cutting edge of Over 50’s Life Insurance is Royal London. Shockingly, they are the only insurance provider in the UK to have what they call “Protected Payout.
What is Protected Payout?
In simplified terms, when Royal London customers pay into their life insurance policy for at least half the term specified, their family is guaranteed something to be paid out when they die. This is something that’s needed from more insurance providers because…
Far too many insurance companies are profiting from customers’ misfortunes, such as lost and unclaimed policies. Do you know what insurance companies call this?
If you know what that means, you’ll probably feel your stomach tighten in knots with disgust. If you don’t know, you’re about to find out.
For Over 50’s Life Insurance policies, the average policyholder will retain the policy for seven years and then subsequently cancel it.
When you cancel a life insurance policy, all your payments become pure profit to the insurer, and you, as the customer, get zero back.
It doesn’t matter if you’ve been paying into the policy for ten or twenty years; the instant you let your policy lapse or even take the all-too-easy steps of cancelling the policy, it’s lapsed, and you’ve lost everything. Well, not literally, but regarding financial protection when you die, yes, everything.
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Why do people cancel such an important financial asset?
It is usually because of financial hardship in the here and now. It could be being made redundant, decreased savings or returns on previous investments, increased living expenses, etc. People would rather choose to lose the policy, save the premiums and pay that towards turning the heating on, for example.
It’s an important decision, and nobody takes it lightly. When you’re in dire straits and need to make ends meet, you first assess your current outgoings. Next is prioritising expenses based on what needs to stay and what can go.
For some, life insurance is viewed as a luxury, not a necessity. That’s certainly true if you have savings or another policy in place to cover funeral expenses. It’s not in all cases, though, as some policyholders have zero backup plans, and their only financial security is their life insurance policy.
Here’s what Jerry Toher – CEO of Royal London’s Consumer Division – says on the matter –
“I was dismayed by how much cover is lost and by evidence that most insurers in this market continue to offer customers inflexible products at a time when they need help”.
The all-important figures from Royal London’s report appropriately titled “High and Dry”:
- 28% of people who bought an Over 50‘s life insurance policy in 2021 – cancelled it.
- Because of cancellation, a collective total of £173m in protection was lost.
- That was based on 52,000 Over 50’s who wonder what happens to your life insurance when you retire. More disturbing is when you think about all the other types of policies people decide to cancel due to financial hardship.
- Of those 2021 cancellations, premiums paid into the policies represented £86m.
Think about that last figure for a second – £86 million. That’s what goes to insurers as pure Lapse Profit!
That isn’t reassuring, and that’s why we felt it was the right time to bring this to the surface to Insurance Hero readers.
Royal London state they are actively working with debt charities, Defaqto, and Fairer Finance to address consumer concerns. Only time will tell if the work, research, studies and initiatives taken will help shake up the insurance market and drive better flexibility to Over 50’s life insurance to lessen the number of policy cancellations.
In the meantime, if you’re considering cancelling your policy, you may want to visit the Royal London debt page to find a list of organisations that may help.
To wrap things up:
Here’s a highlight from Emily Weekes of protected.co.uk
“It’s important not to cancel your existing policy until you know you can get cover for the new amount and you know what price you’ll pay”.
That makes financial sense.