Can income protection insurance payout until retirement?

I have had accident and sickness cover for my mortgage (payment protection plan) but this plan could only payout for 12 months. How long can income protection payout? Is it until I plan to retire, say until age 65 or 70? Thanks.

Question asked by Peter Graham
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Answered by Andrew Jenkinson

Income Protection length of cover options

Yes, absolutely, that is the one of main benefits of an income protection plan over a payment protection policy. For serious medical conditions 12 months of cover usually isn’t anywhere near enough. On long-term plans average claims lengths are usually measured in years, not months.

Insurers used to set the maximum age the plan could run until at age 65 as this was ‘the’ retirement age. However, as we are starting to work later and later many insurers will even offer cover up until age 70 now. It makes sense to set the policy termination age equal to the age you expect to retire.

Thus, with income protection cover your lifetime earnings can be protected. If, for example, you were off work for 5 years the plan would payout every month for 5 years (less your chosen deferred/excess period). Essentially, the policy continues to payout either until you are well enough to return to work or you reach the retirement age set on the plan (i.e. the policy termination age).

Aligning your policy end date to your expected retirement date

If you expect/plan to retire earlier than 65 or 70 years of age then it is perfectly fine to set the policy termination age earlier. Given that the chances of becoming ill are relatively higher post age 60, bringing down the termination age of the plan can lower the monthly premiums significantly.

income protection to retirement
 
retirement planning
 
This information does not constitute financial or other professional advice. You should consult your professional adviser or contact us directly on 02084327333 should you require financial advice. It is important to ensure any insurance policy you take out is suitable for your needs.
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