This is what Martin Lewis says about Over 50s Plans and we really think they have entirely missed the problem from a consumers viewpoint:
“Weigh up whether an over-50s’ plan is really worth it
Over-50s’ plans promise to pay a fixed lump sum on death, with no need for a medical, which you could then use to cover your funeral costs.
While these sound like an easy way to protect your loved ones, there’s a crucial term in the small print:
“Premiums are payable for life and you could pay more in than is paid out on death.”
Because the amount it pays out is fixed, if you live a long time you may end up paying more for the plan than you’d ever receive.
So if you’ve got a plan already, don’t just cancel. First, do some sums to see how good or bad these plans work out for you. For full details see our Over 50s’ Life Insurance guide.”
So what is the major problem with Over 50s Plans?
Easy, it is the fact that a very large percentage of them won’t pay out a penny.
Why? Because they only pay out on death if the policy is still active, so the ideal financial scenario for the insurer is that the client pays for many, many years, then gets a bit old or dotty and forgets what the policy is and cancels it. So the insurer gets to keep all the premiums and doesn’t have to pay out so much as a bean!
Many others will keep topping up their plans in an attempt to keep up with funeral plan price inflation – only to find that they can no longer afford the premiums. Result: you guessed it: the insurer gets to keep all the premiums and doesn’t have to pay out so much as a bean!
I wonder if any of the providers would dare provide the statistics showing what percentage of plans actually pay out?
Footnote: Over 50s plans is a generic name for non-profit whole of life insurance, though the public and some providers use it in a different sense. In our opinion, every sale of a non-profit whole of life plan is likely to be a mis-sale, but as they are not regulated products, I don’t believe compensation is available! Anyway, most people don’t realise there is a problem until it is too late and they are already dead, and for relatives to do anything they would need first o find out about the policy, then prove it was mis-sold, then get a grant of probate and finally complain!!
Our main report on Over 50s Plans is here.