“Protection is cheaper when you are young because it increases in price as you get older, but premiums can be fixed at the time of buying cover,” Mr Conner adds.
Stephen Crosbie, protection director at Aegon, warns there may be higher premiums for those with certain health and lifestyle choices, however.
“The price is higher for those people with aspects of their health or lifestyle that increase the likelihood of a claim, such as smokers, heavy drinkers, people with existing health conditions, adverse family history or those that undertake dangerous pursuits,” he notes.
Monthly premiums are generally cheaper, the younger the policyholder is, than it would be for someone who took out protection for the first time in their 50s.
Delaying protection decisions
But what does delaying buying cover mean in terms of cost?
Old Mutual Wealth calculated two quotes based on an individual working to 65 earning £800,000 over the lifetime.
One is a 25-year-old with a 40-year term and the other is a 45-year-old with a 20-year term.
Mr Roberts explains: “It shows that even though the term is half what it was at the younger age, the premiums increase from £29.92 to £85.60.
“Cumulatively, by taking a policy out to retirement at age 25 would cost £14,361.60 and delaying it to age 45 would cost £20,544.00. So, they’ve missed out on 20 years of cover and it has cost them approximately an extra 30 per cent.”
Figure 2: Life cover quote for a 25-year-old with a 40-year term
Figure 3: Life cover quote for a 45-year-old with a 20-year term
Source: Old Mutual Wealth
Paul Yates, product strategy director at iPipeline, acknowledges it is really difficult to work out the right product type, product and cover amount.
He thinks the need for advisers to help millennials with this decision will become more important.
Mr Yates notes: “With the move for traditional protection triggers - house purchase and birth of children - occurring later, the importance of IFAs and brokers to provide this advice has never been greater.”
eleanor.duncan@ft.com
