Questions are being raised about “outdated” age limits on income protection which could leave older workers and entrepreneurs exposed to financial risks.
Currently, the maximum age you can take out most income protection policies is 59, but the cover can run until age 70.
Insurance brokers claim these age limits are outdated, especially with the state pension age rising and people having to work longer to fund their retirement.
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It comes as record numbers of over-60s are now self-employed, according to data from the Office for National Statistics (ONS), while borrowers are also taking mortgages out for longer.
Brokers say income protection policies should reflect this, yet many older people now running their own businesses technically would be rejected for income protection from age 59, meaning they wouldn’t be covered if they fall ill and can no longer work.
Rob Peters, principal at Simple Fast Mortgages, said: "This is outdated and the industry needs to wake up. We're telling people to work longer, pay tax longer, take mortgages later, but we don’t give them the tools to protect their income at the very time they may need it most. If someone’s earning a wage, they should be able to insure it. Blanket age limits are lazy underwriting."
Joe Farmer, a protection adviser at When The Bank Says No, warns that the income protection cap leaves older people exposed.
He said: "We speak 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.
“If they’re earning, it makes sense they should have the option to protect that income, regardless of their age. Of course, health plays a big role in underwriting, but we should also be taking into account people’s working lives and financial responsibilities.
"With the state pension age increasing and people living and working longer, this is an area that really needs more attention from the industry.”
What is income protection?
Income protection is an insurance product that supports you financially if you are unable to work due to illness or injury. It is particularly useful if you need to cover mortgage payments.
Payouts typically range from 50% to 70% of your salary and will last until you return to work.
Like any insurance product, you will need to pay a premium that is calculated based on your age and other factors such as your occupation.
Ultimately, the older you are, the higher your premium as insurers will deem you at more risk of getting ill or injured.
Income protection providers have decided that 59 is the maximum age that someone can take out a policy as they believe there are higher risks after this that people won’t return to work.
Should the income protection age cap be lifted?
An age limit of 59 seems outdated when the state pension age is 66 and rising, it has been claimed.
ONS data shows the number of self-employed individuals aged 60 and older hit a record 991,432 in 2023, while 35% of new businesses in the UK are now started by people aged 50 and above, according to Enterprise Nation.
Additionally, more people are now taking out mortgages that last into retirement to cope with higher interest rates.
Farmer added: “If they’re earning, it makes sense they should have the option to protect that income, regardless of their age. Of course, health plays a big role in underwriting, but we should also be taking into account people’s working lives and financial responsibilities.
“With the state pension age increasing and people living and working longer, this is an area that really needs more attention from the industry.”
Farmer's view is backed by other brokers.
David Stirling, director at Mint Mortgages & Protection, said: “Insurers have valid concerns at the likelihood of older claimants actually returning to work if they are unable to work due to accident or sickness.
"A short-term income protection product, specifically for the over-60s, could offer a pragmatic balance for the modern workforce, who are often taking mortgages and working into later life.”
Dave Corbett, head of protection at Protection 1st, said the industry needs to create products that are more in tune with modern working practices.
He said: “As mortgage terms run longer, and clients get on the property ladder later in life, income protection cover really needs to be available to those over 60.
"The lucky ones could maybe access their pension pots through early retirement on grounds of ill health, but planning is key here and advice should be taken. Income drives all outcomes and the bills don't stop if you are ill, no matter what your age, so a fundamental re-think here is needed.”
Peters added: "A one or two year monthly benefit policy might be the bridge many people need between illness and retirement. There’s a gap in the market, and a chance for someone to step up and offer a smart, pragmatic solution."
Roy McLoughlin, a member of the Protection Distributors Group, said there are opportunities for providers to develop new products but also for financial advisers.
He told MoneyWeek: “Traditionally a lot of income protection was written to age 55 or 60 but people are working longer now.
“There are concerns with how society is changing that people should still be able to take out insurance.
“There is a positive side that financial advisers should be considering longer term products with their clients.”
There does seem to be recognition in the industry that changes are needed.
Vicky Churcher, executive director of the Income Protection Task Force, which works with providers and brokers to raise awareness and boost sales of income protection across the UK, said the age cap is an area the group is looking at.
She told MoneyWeek: “In an ideal world, income protection policies would not be constrained by age limits, particularly as more people continue working well into their 70s.
“However, this is a complex issue for insurers, who must strike a careful balance between offering a high-quality product and maintaining affordability for consumers.
“At the IPTF, we recognise that current income protection products could be improved in several areas to better meet the needs of today’s workforce and enhance the overall financial resilience of individuals.”
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