Over 50s life insurance is a rip off, claims Which?

Over 50s life insurance plans promoted by daytime TV celebrities are ‘incredibly bad value’ claims consumer champion Which.

After researching a range of polices, the group accuses life insurance firms of luring customers with free gifts and trusted entertainers without explaining just how bad the policies are for most people.

Now, Which wants the Financial Services Authority to investigate how the plans are marketed and sold, often to elderly and vulnerable pensioners who receive no advice about the benefits or pitfalls of the plans.

An over 50 life insurance policy is designed to pay out a cash lump sum on the death of the customer.

Generally, customers pay a monthly premium from the start of the policy until they are 90 years old.

Providing the policy has been in force for at least two years, the lump sum is paid to the estate of the person who has died.

Which claims most of the polices may be cheaper than comparable standard life assurance, but they pay out less than someone could have built up in a savings account, like a tax-free cash ISA, over the same time.

The consumer group gives an example of a 60 year old non smoking man paying £15 a month in to an over 50s life insurance plan.

The average policy will pay £2,980 on his death, typically after 20 years – but he could have saved the same amount in an ISA in 13 years.

Also, the longer he lives after 13 years, the worst the value of the plan as his savings increase but the policy still pays the same cash lump-sum.

Often the attraction of over 50s plans is a ‘no medical’ guarantee .

Among the leading insurance providers offering over 50s life insurance are Legal & General, LV= and Sun Life Direct – whose marketing features TV chat show host Michael Parkinson.