By Damian Youell, Senior Mortgage Broker and Company Director at NeedingAdvice.co.uk
If you run a limited company or work as a contractor, a relevant life policy can provide financial protection for your dependants. But like most insurance products, these policies come with age restrictions. Understanding how age affects your ability to get cover, and what happens as you get older, matters when you’re planning your business finances.
What Are the Age Limits?
Relevant life policies typically involve two key age considerations: an entry age and a maximum cover age.
Entry Age:
Entry age criteria vary by insurer and are determined by individual provider underwriting rules. In general terms across the UK business protection market, applicants must usually be at least 17 or 18 years old to enter a policy, with upper entry ages depending on the specific provider and the required policy term.
Maximum Cover Age:
The maximum age varies by provider and product. For a qualifying relevant-life policy, the policy conditions require the specified age for payment on death to be no higher than 75 years old, according to Gov UK. Under UK tax legislation, a relevant life policy cannot continue beyond age 75 while retaining its qualifying tax status.
How Does Age Affect Your Premiums?
Age is one of the biggest factors in how much you’ll pay for a relevant life policy. Generally, your premiums increase as you get older. This happens for a straightforward reason: the older you are, the higher the statistical risk of a claim occurring.
The increase isn’t always gradual. Some providers use age bands, meaning your premium stays the same for a range of ages, then jumps at certain milestones. Others use stepped increases, where your premium rises each year or at regular intervals. Guaranteed level premiums, where the premium remains fixed throughout the term, are also widely available and often preferred for predictable budgeting.
If you take out a policy early in your working life, you’ll lock in lower premiums. Even if your premium increases over time, you’re starting from a lower base. Wait until you’re older, and you’ll pay more from day one.
This is worth remembering if you’re in your 40s or 50s and haven’t yet arranged cover. The sooner you apply, the better your starting rate.
What Happens When You Approach the Maximum Cover Age?
As you get closer to your policy’s maximum cover age, you have decisions to make.
Some policies allow you to extend your cover beyond the original agreed term up to the statutory limit (age 75). This is called extending the maturity date. You may be able to do this depending on provider terms, though your premiums will reflect your age at that time. Check your policy documents or ask your provider what options you have.
If your policy doesn’t allow extension, or you choose not to extend, your cover simply ends on the specified date. At that point, you lose the protection. If you still have dependants who rely on your income, this creates a gap in your financial planning.
Alternatively, some business owners consider personal life insurance arrangements (such as whole of life cover or personal term assurance) as they approach retirement or their 75th birthday. However, personal policies are funded from personal post-tax income rather than as an allowable business expense, and premiums for whole of life cover are typically higher.
What If You’re Approaching the Age Limits?
If you’re getting close to your policy’s maximum cover age, or you’re interested in getting cover but worried you might be too old, here’s what to consider:
First, check your current policy documents. Look for the maturity date and any options to extend or convert. Acting before a policy lapses is vital.
Second, think about whether you still need the cover. If your dependants are grown up and independent, or you’ve built up sufficient savings and investments, you may not need to extend. But if you still have financial responsibilities or substantial personal guarantees, you’ll want to plan ahead.
Third, if you’re older and haven’t yet arranged cover, don’t assume it’s too late. An independent financial adviser can review the market for products and providers that fit your age and desired term.
Finally, consider speaking to an FCA-regulated financial adviser. They can help you determine how much cover you need, ensure your policy remains compliant with HMRC limits, and coordinate your business protection efficiently.
Planning Ahead Pays Off
Age limits exist both to manage insurance underwriting risk and to comply with UK tax legislation. Arranging cover earlier in your career secures significantly lower monthly premiums and ensures your dependants are protected while you build your business.
Important: The benefits to the treatment of tax will depend on your individual circumstances and may be subject to change in future. This article is for information only and does not constitute financial advice. To find out whether a relevant life policy is right for your circumstances, speak to an authorized financial adviser.