There are, however, a number of drawbacks to over 50s plans, explaining why most advisers will only look to them as a last resort. The biggest one is price.
Lakey ran a comparison between Scottish Friendly and AIG, which requires medical checks. A non-smoking male born in 1955 and looking to insure a value of £10,000 would pay £50.96 a month to Scottish Friendly, and £33.45p a month to AIG for the same cover - this latter figure also includes commission to the adviser.
“Scottish Friendly is normal within its marketplace,” Lakey explained, having compared it with a rival which charges a 1 per cent higher premium.
The mutual’s latest over 50s plan also can’t be written in trust, which means if the policyholder dies, the amount they insured will go through a probate process with the taxman.
If it was in trust, this would mean insurance was paid out immediately upon death, allowing family members to use the payout to cover funeral costs.
Lakey explained that for the provider, this option was cheaper because it avoids filling out trust forms and taking on the extra risk, but it is not necessarily better for the client.
The maximum age of Scottish Friendly’s policy also cuts off at 74, whereas other whole of life policies on the market can range up to 85.
ruby.hinchliffe@ft.com
