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Over 50s look to cancel life cover as inflation bites

Samantha Partington
Written By:
Samantha Partington
Posted:
Updated:
12/04/2023

More than one in five policyholders aged over 50 say cost of living pressures may force them to cancel their monthly life insurance premiums.

Women are most affected with 28% of those surveyed claiming inflation, currently 10.4%, is making it difficult to maintain their life insurance cover compared to 17% of men.

The study of 1,000 over-50s was carried by financial mutual Scottish Friendly.

More than 55% of respondents with an over-50s life insurance plan said they took out a policy to cover funeral costs, while 46% did so to provide financial support for their family in case of their death.

Meanwhile, just under one in 10 started a plan to help pay off their mortgage.

By discontinuing premiums households risk not receiving any financial benefit from their life insurance policy when they die.

Jill Mackay, head of marketing at Scottish Friendly, said: “Inflation has increased again after falling for three consecutive months and continues to affect household budgets.

“Dealing with price rises is particularly difficult for those on fixed incomes, such as those in retirement.

“However, while it might be true that not all types of insurance are indispensable, it is important to think carefully before cancelling life insurance cover.”

Reduced benefit

Some providers will pay out a proportion of premiums on the death of the policy holder if they have stopped making their payments during their lifetime. This feature is called reduced benefit and is not offered by all providers.

For families to receive a proportion of the premiums, the policyholder must have paid into the policy for at least two years.

Policyholders who are considering stopping paying their monthly premium should contact their provider to find if reduced benefit is a feature of their plan first.

Financial difficulties

Chris Sykes, technical director at Private Finance, said: “Arguably it is now more important than ever to have protection because if you were to cancel your policy and die tomorrow what position could this leave your family in? By cancelling your premiums you’re leaving your family with the financial burden you couldn’t manage when you were alive.”

He adds: “There are forms of insurance like income protection and critical illness which are also important not to cancel if you can afford to keep them. These policies will protect you financially if you’re too ill to work.”

Before you cancel your premium

  • Call your provider to ask if there are any payment arrangements they can offer until your financial situation improves.
  • Find out if you have a reduced benefit feature.
  • Go through your household budget and bank statements to see if there are other less essential cutbacks you can make before cancelling important insurance policies.
  • Consider that you may be facing a higher premium if you restart another life policy at a later date. The older we get, the more expensive premiums become.
  • Ask a broker to review your existing insurance policy premiums. If you’ve given up smoking since taking out the policy, your premium may now be cheaper.