When you have elderly loved ones, it is important to think about their financial security. Anticipating the potential problems they may encounter in the future is essential. For peace of mind, many people decide to take out an insurance policy of some kind. There are several types of insurance available for older people, but it is not always easy to find the right policy for them.
This article will aim to inform you about the different kinds of insurance policies available and will hopefully allow you to make more informed choices in the future.
What is Insurance?
In a nutshell, an insurance policy protects you from financial losses after events such as injury, illness, or damage to property. Most kinds of insurance are optional, but car insurance is compulsory for all drivers in the UK.
Life Insurance
Life insurance is a policy that will pay out a lump sum or regular instalments after the insured person’s death. If you have dependants (e.g. a spouse and/or children) who rely on your income, taking out a life insurance policy can offer you all a great deal of reassurance.
Who is involved in a life insurance contract?
Depending on the kind of policy you take out, the parties involved in your contract may vary.
- The policy owner/policyholder – the person who takes out the policy in their name. This may not be the person whose life is being insured.
- The insured – the person whose life is covered by the insurance policy.
- The insurer – the company providing the policy.
Types of policy
There are a few different kinds of life insurance policy.
- Term – a policy that runs for a fixed period of time e.g. 10 years. It will only pay out if the insured dies within the term of the policy.
- Whole of life – this policy will pay out no matter when the insured dies. Premiums for a whole of life policy can be more expensive (and if the insured lives for a very long time, the policyholder may pay in more than they get back).
- Joint – a policy that covers two people e.g. a married couple. Note that it will only pay out when the first person dies within the term of the policy.
- Single – a policy that covers one person. When this person dies, the pay-out will go into their estate. Therefore, the insured will need to specify in their will who should receive the money.
No matter which kind of policy you choose, the policyholder will need to make sure they keep up with their monthly premiums. If you miss a payment, your cover may stop and the policy may be void.
Long-Term Care Insurance & Immediate Needs Annuity
Long-term care insurance policies are no longer sold. They used to be available for those wishing to cover themselves against the cost of their ongoing care. If you’re worried about paying for your care, you may want to take out an immediate needs annuity. This is a kind of insurance policy that is designed to ensure you can pay for your care for the rest of your life.
With an immediate needs annuity, the policy owner will make a lump payment upfront. Then that payment will be used to provide a regular income for the rest of the insured person’s life. This income can be used to pay for some or all of the insured’s care costs.
The amount you’ll need to pay upfront will depend on a few key factors including age, current health, the cost of your care, and your life expectancy. If you choose to pay the income from your annuity directly to a registered care provider, you will not have to pay tax on it.
Deferred Needs Annuity
Just like an immediate needs annuity, a deferred needs annuity gives you a guaranteed lifetime income to pay for your care. You’ll still make a payment upfront to fund your ongoing care. The difference is that you won’t start receiving a regular income from your annuity straight away. Depending on the plan you choose, you’ll wait for a period between 12 months and five years before your payments start. You’ll still be responsible for funding your own care in the meantime. However, you’ll usually end up paying less upfront for a deferred annuity compared to an immediate annuity.
Prepaid Funeral Plans
Prepaid funeral plans aren’t exactly like an insurance policy, but they can protect your family from the financial burden of paying for your funeral. Funeral costs in the UK have been on the rise for several years and this trend looks set to continue. The average cost of a funeral in the UK is £5,033 for a burial, with average cremation funeral costs at £3,885. Of course, financial stress is the last thing anyone needs while they’re grieving, which is why prepaid funeral plans are so popular.
Another advantage of a funeral plan is that you can specify your own wishes for your send-off. Would you prefer a traditional burial or a cremation? Would you like a particular song to be played during the service? Talking to your loved ones about these things isn’t always easy – setting out your wishes in a funeral plan can make it all much easier.
Most providers will let you pay in monthly instalments or pay the entire cost upfront. Paying upfront often works out cheaper in the long run.
Travel Insurance
Travel insurance protects you from the cost of problems that might arise while you’re on holiday. This includes medical treatment, cancellation, lost or stolen belongings, and legal bills.
There are two main kinds of travel insurance:
- Single trip – a policy that covers you for one holiday or trip abroad.
- Annual – a policy that covers you for an unlimited number of trips in a single year (usually with a limit of 31 days per trip).
Insurers are fond of statistics, so you won’t be surprised to know that the older you get, the more likely you are to get sick, whether travelling or at home. The first consequence is that travel insurance rates increase according to your age. Once you hit 75, it can become difficult to get travel insurance for a single trip. However, there are specialist insurers who provide travel insurance for older people. In addition to age, the length of the trip can affect the cost too.
When travelling outside the country, leaving without travel insurance can have unfortunate consequences. Indeed, if you get sick or have an accident during your stay, covering your medical expenses can be very expensive, especially in countries like the USA.
Careline Alarm
To ensure a carefree and independent life, order a Careline alarm. Please don’t hesitate to get in touch with our friendly Customer Service team on 0800 101 3333. Alternatively, you can send them an email to info@careline.co.uk or visit our Careline Alarm Guide.
Editor’s Note: This blog was updated on 12th July 2022 to reflect current information.
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