THE insurance industry needs “to wake up” and address an “outdated” approach to income protection that is leaving many older workers exposed, experts have warned.
Currently, the maximum age you can take out most income protection policies, which support you financially if you are unable to work due to illness or injury, is 59.
Experts say the maximum age the policies typically run to, either 69 or 70, also needs to be addressed given that more and more people are working way beyond the state retirement age and into their 70s.
Joe Farmer, a Protection Advisor at When The Bank Says No, said industry-norm age limits as to when people can take out, and benefit from, income protection policies “is definitely something providers should be looking at”.
Older people left exposed
He added: “The income protection cap leaves older people exposed. 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.”
Mr Farmer accepts that insurers have some valid concerns, as, statistically, people who claim on income protection later in life are less likely to return to work.
However, he believes one option is for insurers to offer shorter-term cover such as a one-year policy paying out a monthly benefit. “That would at least be a step forward,” he adds.
Finding a pragmatic balance
David Stirling, Director at Mint Mortgages & Protection, agreed, saying: “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.”
Rob Peters, Principal at Simple Fast Mortgage, said current restrictions on when you can take out income protection and the age the cover extends to are “outdated and the industry needs to wake up”.
He continued: “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.
Blanket age limits branded “lazy”
“If someone’s earning a wage, they should be able to insure it. Blanket age limits are lazy underwriting. 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.”
Dave Corbett, Head Of Protection at Protection 1st, said the protection 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.”
