Two thirds of respondents to a survey by Scottish Friendly, with an over-50s life insurance plan say it has become more important because the cost-of-living crisis is putting families under greater financial pressure.
Inflation is causing premiums to rise, so people taking out a policy now are facing higher costs than those who locked into a level policy in previous years. However, those that already have an inflation-linked policy are starting to feel the pinch.
The problem of paying premiums is exacerbated for the over 50s as many are likely to be on fixed incomes if they have taken an annuity or are relying on the state pension, and others are unlikely to be in full-time employment. In the Scottish Friendly survey for example, just 27 per cent of respondents were working full-time.
According to Scottish Friendly, the majority (57 per cent) of over 50s take out a plan to cover the cost of their funeral, while 46 per cent do so to help provide for their family financially if they pass away.
An added worry for nearly half (46 per cent) of respondents, is that the value of their plan will be less than they hope, or that inflation is eroding the value of it.
Gareth Hope, Wren Sterling’s Head of Research, says life insurance can be the answer to helping out the next generation financially, but it’s not the only option: “While it depends on each individual’s objectives, gifting assets could be an option, rather than relying on a life insurance pay-out down the line. What’s more, the gifter would be alive to see the benefits of such a move. We’re seeing more and more clients thinking in this way, and there are several options for facilitating this, such as the creation of Trusts.
“If gifting assets isn’t an option, then life insurance can be, but earlier planning is always best. This is where a financial planner will crunch the numbers and decide whether an inflation-linked policy is the right course of action based on affordability, as well as other factors like health, and the financial position of dependents. It is a complex market with numerous product features so I would urge people not to try and arrange directly, particularly if this is going to be the primary means of providing for their family in the event of their death.”
Looking for a review of your life insurance policies or your gifting strategy?
IMPORTANT: The Financial Conduct Authority does not regulate estate planning, tax advice, Wills or trusts.