Should the age limit for income protection be raised?

Only those under the age of 59 are eligible for income protection coverage

Should we raise the limit since people are working longer hours now?

Concerns have been raised regarding "outdated" income protection age limits, which may expose older employees and business owners to financial risks.

Most income protection plans currently have a maximum age of 59 at which you can obtain coverage, although the coverage may continue until age 70.

According to insurance brokers, these age restrictions are out of date, particularly in light of the rising state pension age and the requirement that people work longer hours to save for retirement.

It coincides with a record number of people over 60 working for themselves, according to data from the Office for National Statistics (ONS), and longer mortgage terms for borrowers.

Many older people who now own their own businesses would technically be denied income protection from age 59, which would mean they wouldn't be covered if they became ill and were unable to work, according to brokers who say income protection policies should take this into account.

Simple Fast Mortgages principal Rob Peters stated: "The industry needs to wake up because this is out of date. We advise people to work longer, pay taxes later, and take out mortgages later, but we don't provide them with the resources to safeguard their income when they might need it most. Anyone who is making a living ought to be able to purchase insurance. The underwriting of blanket age limits is lazy.

According to When The Bank Says No protection adviser Joe Farmer, older people are left vulnerable by the income protection cap.

"We talk to clients every day who are working well into their 60s, some even into their 70s, and many of them are still financially responsible for things like mortgages or supporting family," he said.

"It makes sense that, regardless of age, they should have the option to safeguard their income if they are making it. Health is obviously a major factor in underwriting, but we also need to consider people's financial obligations and working lives.

"The industry really needs to pay more attention to this area as the state pension age rises and people live and work longer.

What is meant by income protection?

Income protection insurance helps you out financially in the event that an illness or injury prevents you from working. If you have mortgage payments to make, it is especially helpful.

The payouts will continue until you return to work and usually range between 50 and 70 percent of your salary.

As with any insurance plan, you will have to pay a premium that is determined by your age as well as other variables like your line of work.

In the end, your premium will increase as you age because insurers will consider you to be more likely to become ill or be hurt.

Because they believe there are greater risks that people won't return to work after this age, income protection providers have decided that 59 is the maximum age at which an individual can obtain a policy.

Should the age limit for income protection be raised?

Given that the state pension age is 66 and growing, a 59-year-old age limit seems out of date.

The number of self-employed people 60 and older reached a record 991,432 in 2023, according to ONS data, and according to Enterprise Nation, people 50 and older now start 35% of new businesses in the UK.

In addition, more people are adjusting to rising interest rates by taking out mortgages that extend into retirement.

Farmer went on to say: "Regardless of their age, it makes sense that they should have the option to safeguard their income if they are making it. Health is obviously a major factor in underwriting, but we also need to consider people's financial obligations and working lives.

"The industry really needs to pay more attention to this area as the state pension age rises and people live and work longer.

Farmer's perspective is supported by other brokers.

"If an accident or illness prevents an older claimant from working, insurers have legitimate concerns about whether they will actually return to work," stated David Stirling, director of Mint Mortgages and Protection.

A short-term income protection plan tailored to people over 60 might provide a sensible middle ground for today's workforce, which frequently takes out mortgages and continues to work into old age.

Protection 1st's head of protection, Dave Corbett, stated that the industry must develop products that are more compatible with contemporary working methods.

"Those over 60 should have access to income protection coverage as mortgage terms lengthen and clients climb the property ladder later in life," he stated.

Because of their poor health, the fortunate may be able to access their pension funds through early retirement; however, preparation is essential and guidance should be followed. A fundamental rethink is required because income determines all outcomes and, regardless of age, medical expenses continue even when you are ill.

"Many people may require a one- or two-year monthly benefit policy as a transitional measure between illness and retirement," Peters continued. A market niche exists, and there is an opportunity for someone to fill it with a clever, workable solution.

According to Roy McLoughlin, a member of the Protection Distributors Group, financial advisers and providers alike have the chance to create new products.

He told BFIA: "People are working longer now, but historically, a lot of income protection was written to age 55 or 60.

The way society is evolving raises questions about whether or not people should still be able to obtain insurance.

"There is a benefit to financial advisors discussing longer-term options with their clients.

It appears that the industry recognizes the need for change.

According to Vicky Churcher, executive director of the Income Protection Task Force, which collaborates with brokers and providers to increase income protection sales and awareness throughout the UK, the group is considering the age cap.

In an ideal world, age restrictions would not apply to income protection policies, she told BFIA, especially as more people continue to work well into their 70s.

But this is a complicated problem for insurers, who have to carefully balance providing a premium product with keeping costs down for customers.

"At the IPTF, we acknowledge that existing income protection products could be enhanced in a number of ways to better serve the needs of today's workforce and improve people's overall financial resilience."