Another route to at-need

words: Mark Moran, Golden Charter

Guaranteed over 50s life insurance and Funeral Benefit Options: why they’re important for your future business


What is a Guaranteed Over 50s (GOF) life insurance policy?

Many people take out life insurance so that a lump sum can be used to pay off a mortgage, or settle outstanding debts, when they die. For a person looking to take out life insurance at 50, their thought process may be slightly different and they would find Term Insurance (a policy that provides cover for a defined number of years) premiums much more expensive than if they were aged 30 – and it’s likely that they would also see some restrictions on the terms of their policy.

Why? Because Term Insurance involves full underwriting on an individual’s medical history and, unsurprisingly, the older you become the more likely you are to have had previous medical issues. These issues are then likely to have a negative impact on the individual’s premium.

Furthermore, Term Insurance isn’t best suited to everyone. If you’re over 50 and have paid off your mortgage or have children who are grown up, your needs will be very different to a 35-year-old who has a young family and 20 years of mortgage payments to make. This is where Guaranteed Over 50s Insurance comes in.

As the name suggests, this is a type of life insurance targeted at those aged over 50. A customer will pay for this type of life insurance with monthly premiums and when they die, it pays out a lump sum which was fixed at the time of application. The money is often used towards funeral costs, to pay off existing debts or simply as a gift to leave to loved ones. The sum assured can be anything from £1,000 to £25,000.

The main attraction of an Over 50s policy is acceptance is guaranteed. There are no health questions to answer or medical assessments requested. This means that if you’re aged between 50 and 80, you will automatically be accepted.

Another advantage of Over 50s insurance is that the premiums are usually fixed. Accordingly, there is a policy for everyone’s budget, with a desired level of cover which will remain at a constant price for the entirety of the customer’s life.

Of course, the lack of medical questions does result in a lower ‘sum assured’ (amount payable on death) than available through a Term Insurance policy for a healthy applicant. These policies are therefore very attractive to those older age groups where health has been an issue in the past.

The Funeral Benefit Option (FBO)

With funeral expenses often a significant source of stress for the Over 50s, many people clearly want to make sure the costs of their funeral are covered when the time eventually comes.

Covering future funeral expenses is the purpose of a funeral plan, however the Funeral Benefit Option, through a Guaranteed Over 50s product, offers policy holders another way of planning ahead.

So how does the FBO work? It really is very simple. If the policy holder has opted to include the Funeral Benefit Option in their insurance policy, when they pass away the surviving family will contact you, the funeral director, in the same way they would if they had a funeral plan.

You then arrange the policy holder’s funeral and present an invoice to Golden Charter, and we will arrange payment in the normal way. The funds for payment of the invoice will come from the insurance company, with whom Golden Charter will liaise throughout the entire claims process.

If the invoice amount is less than the sum assured then the remaining balance will be settled through the policy holder’s estate. If the amount of the invoice is higher than the sum assured, the family will be responsible for the balance due.

In simple terms, an FBO is an at-need funeral from the funeral director’s perspective. As an incentive for the policy holder to choose your firm, a contribution of £300 towards the cost of the funeral services is required, which can be in the form of a discount off the total price or in the form of added value services, for example an additional car or upgraded coffin.

It’s important to note that competitor insurance policies with a Funeral Benefit Option included offer similar incentives.

The market

Despite the exit of many of the high street banks from the financial advice market in 2012, the Guaranteed Over 50s market continues to grow through independent providers and insurance specialists.

In 2017, the market grew by 5.8%, meaning 292,047 customers took out this type of insurance. With the vast majority of these policies taken out to deal with funeral expenses, it’s essential Golden Charter acquires as much of this type of future funeral business on behalf of independent funeral directors as possible. With conversion rates of 30% from insurance policy to Funeral Benefit Option, around 87,000 annual funerals could be acquired for independent funeral directors across the UK. Frankly, if we don’t ‘win’ this business our competitors will.

Additionally, our own experience with FBOs shows that the average sum assured continues to increase considerably. The current average sum assured is £4,838, a significant amount and greater than the cost of the majority of at-need funerals today.

Why FBOs are a good choice for funeral directors

As previously stated, the average sum assured for each FBO continues to rise, providing you with a significant at-need funeral contribution.

Where sums assured seem to be lower than the average quoted, view these as down-payments for the funeral as the family or next of kin are required to make up the shortfall for the funeral service provided by you. This is always made clear to the customer at the point of sale by all our partners, as well as being explicitly clear in the membership pack sent by Golden Charter.

Most importantly, by supplying over 50s providers with our FBO product, we ensure that a significant number of funerals are not allocated to any of our funeral planning competitors, which can only make great business sense.

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