Watchdog finds over-50s misled by funeral cover claims
Older people are being misled by promotions for life insurance that imply the policies will cover funeral costs in full, only to leave bereaved families with bills for hundreds of pounds.
City watchdog the Financial Conduct Authority has issued a warning to firms which offer life cover for those aged over 50 after studying adverts which skirt fair promotion rules, sharp practice previously reported by Telegraph Money.
More than 380,000 over-50s policies are taken out annually, according to the Co-op. Widely promoted, in return for monthly premiums they guarantee to provide life insurance without the need for a medical examination.
Often the promotions refer to providing peace of mind for loved ones, by ensuring they aren’t left paying for “funeral and associated costs”.
The FCA warned proceeds of these policies can be used for payment towards the cost of a funeral, but may not cover the costs in full.
"The financial promotions team has seen promotions for life policies for the over-50s where we believe consumers could be misled into thinking they are buying a policy that will cover their funeral costs," it said in a statement.
“If a firm’s promotion includes product features or benefits, these must be presented in a fair, clear, and non-misleading way taking into account the target audience."
Telegraph Money previously reported that, on average, people who use over-50s plans leave their families with a shortfall of around £1,500 when it comes to paying for their funeral arrangements.
Most over-50 plans are sold direct without advice. Customers may pay more in premiums than the sum assured – the amount paid on death – depending on how long they live.
In 2012, insurance trade body the Association of British Insurers told firms selling the cover that their marketing material should be “crystal clear to potential customers”.
This includes specifying that the plan is an insurance policy, not a savings arrangement, and that there is a risk customers will pay in more than they get back.
Where a policy has no age limit for premiums, it must be clear “premiums are payable for life, however long that might be and the implications this has for the possibility of an overpayment”, the guidance stated.
Telegraph Money recently reported that the cost of dying was rising twice as fast as the cost of living.
laura.miller@telegraph.co.uk
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