Insurance


Insurance is now an everyday necessity that can take up a significant amount of your income. However, the good news is that it's easier than ever to ensure you are adequately protected and you are paying for the cover you need. To find out more about the types of cover you might need, things to look for, and our own life assurance products, take a look below. 

Protecting yourself with life insurance

For many people, life insurance is absolutely essential, especially when they've got a young family to think about. To others, it seems like a strange thing to think about, especially in later life. After all, you're getting older, so you might wonder if you even qualify. If you've ever wondered what type of life insurance there is for retirees, you're not alone. 

What is life insurance and why would it be useful to me when I retire?

Life insurance is a product where you pay regular amounts of money (premiums) to a provider, and if you die, that company will pay a sum of money to your estate (or to a named beneficiary).

That money can then be used to help pay off a mortgage, support the family, pay the bills in your absence – or even provide money for a charity after your death – so if there's someone depending on you for financial support then, yes, it's a good idea to consider life insurance.

Depending on the type of life insurance policy you buy, it can pay out a lump sum or provide a regular income. Before you begin, you should work out what you want life insurance cover for, how long you want it for, and if you can afford it (there's no point in starting to pay premiums if you know you can't afford to keep them up). Here are some ideas to consider:

  • Work out how much you want to leave to your beneficiary or beneficiaries – the more you want to leave, the higher your premium will be.
  • Don't accept the first quote – shop around. Some providers will ask you more detailed questions, take some time to answer them correctly.

And in retirement, specifically? Depending on the type of policy you want, it may cost more to secure cover as you get older - the premiums are likely to be higher. However, that doesn't mean you should be put off as some policies are an excellent tool in terms of helping manage your inheritance tax liabilities – and some are specifically designed for older people.

So what types of life insurance are there?

Essentially there are two main types of life insurance – term assurance policies and whole of life policies. There are then derivatives of these life insurance policies for certain customers, such as over 50s policies and family benefit policies.

Term assurance

There are various different terms available with life insurance products.

  • Level-term policies – these pay out a lump sum when you die within the term of the policy. The amount paid remains level throughout the term – and the premiums usually stay the same, too. These policies are a good option if you want to help your family, or cover an interest-only mortgage in the event of your death.
  • Decreasing-term life insurance policies – as the name suggests, the amount covered will decrease over the term of the policy. These policies are better for debts that reduce over time, such as repayment mortgages (they can also be used for inheritance tax planning).
  • Increasing-term life insurance policies – again, their name says it all: over time, the amount they pay out should increase so that the sum being paid keeps up with inflation.

Family income benefit policies

These policies are another type of decreasing term policy, but they’re designed to pay a regular income to your beneficiaries – after you die – until the policy's expiry date. The disadvantage with these policies is that if you take out a 25-year policy, but die one year before the policy ends, then your beneficiaries will only receive an income for the final year.

Whole-of-life policies

These are on-going policies, as the name suggests, which pay out when you die whenever that may be. These policies are usually more expensive because it's guaranteed that you'll die at some point, so they do have to pay out (as long as the premiums are paid). 

Over 50s life insurance

In general, anyone over the age of 50 is accepted for a policy like this, without having a medical. So it’s a way of assuring there’ll be a lump sum paid out to your estate, even if you’ve had medical problems in the past or are suffering from ill-health now. 

With that in mind, many people use them to cover funeral expenses, and see them as a form of funeral planning. In some cases, if you were to die within a certain period of time, your premiums may be refunded to your estate. Premiums are usually relatively inexpensive, but the cover offered is also usually relatively low.

How much does it cost?

Like all financial products, the cost of life insurance is based on a number of factors – most notably your age, occupation and health. This is because the insurance company has to assess the risk of your dying over the life of the policy, and the likelihood that they will have to pay the sum assured to your estate. In order to get an accurate quotation, it's worth talking to your relevant financial adviser, or looking at comparison websites to get an indicative quotation.

Protecting your possessions in retirement

Insurance can be an important factor when it comes to genuine peace of mind. Having the right cover in place means you can relax, knowing that the effects of unexpected and often unwelcome future events can be minimised. This allows you to safeguard your most cherished possessions – from the house, to your car and even your pets.

Do I really need insurance when I retire?

One of the many changes that people experience when they retire is that of living on a fixed income – often lower than they were used to receiving when they were working. And, while insurance can be a considerable expenditure out of this fixed income, the costs of replacing your possessions – whether it be your car, your TV, or looking after your pets if they become sick or injured – can be considerable. So, unless you have savings to fall back on, insuring the things that matter to you can be a worthwhile investment. We look at the key points in detail.

Home and contents insurance – do I really need it?

Most mortgage lenders insist you have buildings cover in place, but very few of them will insist on contents cover – that’s usually up to you. However, it does make sense to protect your assets properly, and it’s a very good idea to make an inventory of your personal items for that purpose.

In retirement, this serves the dual purpose of helping you to understand what your estate is worth from year to year. That’s very useful when it comes to considering Inheritance Tax, and making sure you have arrangements in place that reflect the true value of your estate.

How do I know how much cover I’ll need?

An estate agent will be happy to give you an approximate market valuation, but should anything happen to your home, then an insurance company will usually offer cover for 'rebuild' value, which will be slightly lower than that amount.

When it comes to insuring your contents, it's surprising how quickly the value of what you own can add up. It's easy to remember things like jewellery, computers, televisions and antiques – but what about cutlery? Crockery? Carpets? Light bulbs and kettles? If you were unfortunate enough to lose everything in a fire then you'd have to replace it all.

That's also why it's important to make sure you know what's covered under your policy, and what's not. Make sure you check the small print and review your cover regularly.

Are insurance comparison sites worth using?

They can be. But don't dismiss the idea of 'going direct' too. Some companies offer discounts for eliminating 'the middle man', and there may be products that are exclusively available by purchasing directly, or online via the providers' websites.

What about car insurance?

As you get older, you'll find there's something of a division in opinion among car insurance providers. Some will take your maturity into consideration and 'reward' older age by offering lower premiums, on the basis you may be less likely to have an accident due to reckless behaviour. But others believe you'll be more of a liability – failing health and slowing reflexes being to blame in most cases – and a few insurance providers will refuse you as a customer, over a certain age.

What's important, is that you spend time understanding what each provider offers, as no two policies are identical:

  • Be honest about your health, remember to declare any medicines you’re taking.
  • Ask if reduced premiums may be available for paying the whole policy up front.
  • If you do have an accident, use the claims line provided – the provider’s customer service team is there to help you.

Anything else I should know?

Yes. If you're happy with your current insurer, and don't have a history of claims with them, it's well worth having a conversation to find out if they'll continue cover – despite what their general marketing claims.

In addition, an agreement drawn up between the Association of British Insurers (ABI), the British Insurance Brokers' Association (BIBA) and the government means that if an insurer or broker won't offer cover to an older motorist due to their age, then the firm must help them seek an alternative provider.

I have several pets. Do I need to insure them as well?

Pet insurance can be ideal, particularly if you're relying on an animal for companionship and you're on a limited regular income in retirement. But there are some key things to consider before you take out a policy (and don't worry, the providers aren't worried about your age):

  • Can you afford to keep up the premiums on a limited income?
  • What will the premium cover – will it cover every routine check-up as a ‘lifetime’ policy?
  • Would you prefer accident insurance only, which is likely to be cheaper?
  • Does your pet have any illnesses that you do need to declare?

What else do I need to know about pet insurance?

Depending on which benefits you're claiming, you may be able to get help treating your pet without making a claim on pet insurance.

The People's Dispensary for Sick Animals (PDSA) offers discounts and some free treatment to anyone receiving means-tested help with their rent or Council Tax liability (Housing Benefit or Council Tax Support/Reduction), and live within a defined catchment area around a PetAid hospital, branch or practice.

And if you're receiving Pension Credit, it's possible the Dogs Trust may be able to help you with treatment costs for your dog, depending on where you live in the UK.

Protection abroad

You have more time to travel, but it’s important to be safe. Travel insurance will help you get the peace of mind you need, but you must make sure you’re getting the right policy...

Travel insurance in retirement – what do I need to know?

You may want to broaden your horizons in retirement, and make the most of your savings with some overseas travel. If so, that's something exciting to look forward to – but unfortunately, you may find it harder to get travel insurance to fulfil those ambitions.

Some providers believe there'll be higher risks involved if you are older, and the truth of the matter is that older people are statistically more likely to make a claim due to their health. In addition, those treatment costs are likely to be higher. And in some cases, those in their 80s can find they are turned down for cover altogether.

But that doesn't mean you can't get insurance. There are specialist providers of travel insurance for older people who take into account your maturity and offer additional medical and emergency cover as standard.

So what should I be looking for in older people’s travel insurance?

As with all insurance policies, it's important to understand what you would or would not be covered for with a travel insurance policy:

  • Read through the terms and conditions carefully. If they're complicated and there's something you're not sure about then call the provider before you buy the policy.
  • The provider's customer services team should know the policy well, and if they can't answer your questions, they'll be in an ideal position to find someone who can.
  • Think about your budget – with limited retirement income it may be better to buy a single-trip policy for a lower price, than invest in a multi-trip policy (just in case you can't travel later in the year).

Above all, be honest. Do declare any pre-existing medical conditions and medicines you're taking. Even if you're tempted to omit some of the details in an attempt to bring down the premiums: don't – because you could end up without any cover at all as a result.

How much will it cost?

It will depend on your age, where you are travelling to, how long for etc. Many specialist travel companies offer you a number of options, including:

  • Adding children or grandchildren to the policy.
  • Additional golf or winter sports cover.
  • Long stay trip cover if you are off on the trip of a lifetime or a world cruise.

Don't I get free health insurance if I travel in Europe?

As a UK resident (not the Channel Islands or Isle of Man), you're entitled to free or discounted medically nescessary treatment at state-run hospitals and GPs in any European Union country – plus a few others. You need to apply for an Global European Health Insurance Card (the replacement for the old E111 form and EHIC) at least a week to ten days before you go away – preferably longer to allow for busy periods. There are several ways to apply for a card – including the GHIC Website – and remember it's absolutely free to apply. Please beware of scam websites that try to charge you for the card. It costs nothing and you shouldn't need to part with any money when you apply for a card.

GHIC cards ensure you get access to state run medical treatment – so it means they are not a substitute for good travel insurance. Depending on where you go, state health provision can be less readily available than in the UK – and the standards won't necessarily be as high. Travel insurance also covers you for a lot more than the costs of any medical treatment – including flight delays and lost or stolen belongings, so it's worth having travel insurance if you are thinking of heading abroad.