When did homeowner protection cover become such a luxury?

Almost two-thirds of homeowners have life cover in place. That more than a third doesn’t is shocking enough. But, when you see how few have critical illness cover in place, you truly appreciate how vulnerable the uninsured are.

And, let’s face it, the nation’s collective health is only going one way: down the pan. So, what are the determinants preventing people from insuring against long-term ill health?

Let’s dive into the stats first, then why they make such poor reading. And I’ll finish with a convincing argument why everyone should take out protection cover when they’re young. Trust me: it’s a doozy.

Life and Critical Illness, by numbers

First off, let’s provide context to the following figures. All the tables below are based on 30-year old non-smokers planning to retire at 65.

There are also two main comparisons used throughout:

• men vs women
• homeowners vs renters

All the data I’ve taken from Royal London’s Tackling the gender pension and wealth gap (PDF). It’s an in-depth report, which makes fascinating reading. But I’ve extracted only the headline figures here.

How likely are you to die/take prolonged time off due to illness?

It’s morbid, but something I assure you every life cover policyholder considers before getting cover is:

• how likely am I to die?
• and, when?

They ask similar questions when considering critical illness cover. You can see it in their faces, weighing up the annual cost of a policy against the likelihood of them developing a debilitating illness.

Maybe they’re right to flip a coin. Historically, most people haven’t taken prolonged time off work due to illness. But more and more people post-pandemic, especially in younger age ranges, are taking time off due to illness:

while all age groups have seen a rise in the share of professional services workers taking sick leave, workers 25-34 years old have seen the largest increase: 32% of workers aged 25-34 have taken sick leave so far in 2023, compared to 28% of workers aged 35-54.

This stat is from Gusto, which has a customer base of 300,000+ SMEs:

That’s the equivalent in the US; now, let’s compare them with Royal London’s UK results.

Life expectancy and chances of suffering a critical illness

Here, we look at how likely the Royal London base profile is of dying, getting a critical illness or having two months or longer off work during their working life.

It’s that last column that will have most readers worried. More than a quarter of men and well over a third of women will take two or more months off work. 

With the state of the nation’s health, there’s little to make me think that those odds will change any time soon. We’re yet to see any sign of the government’s commitment to ‘level up the nation’s health’.

So, could you afford that long on basic sick pay?

The greater disparity: homeowners vs renters

More and more young workers are struggling to get on the property ladder. The gap between wage growth and affordable homes has grown considerably.

As such, the ‘renters’ in this next breakdown have come to reflect a larger portion of the UK populace in recent years.

If anything, these figures reflect that if someone owns their home, they’re more likely to protect what they have. But, with growing housing shortages, it’s the mindset of renters that has to change.

Private landlords are selling up. Councils’ budgets are paper thin and are pulling out of buying properties to use as social housing. There’s zero meaningful traction on building affordable homes.

It will soon be more difficult to access decent rental properties than it is to get on the property ladder today. Renters wanting any degree of security over keeping their current accommodation will need to take insurance seriously.

Planning for tomorrow when you can’t afford today

In an ideal climate, everyone would have all three types of lifestyle protection cover. I know not everyone has that ‘luxury’. And the global economy is not only making things difficult; the potential’s there for it to get tougher yet.

Some would also argue that employers don’t offer enough when it comes to covering longer-term absence. After a short while, they stop paying your monthly wage and you’re onto basic SSP.

And talking of Statutory Sick Pay, how far will £109.40/week go when the average rent (outside London) is £1,059/month? Even then, it’s payable for 28 weeks maximum. 

Quite literally, safeguarding your lifestyle when you’re ill, or leaving your family debt-free when you die: it’s down to you.

A very real example of how life cover costs more the longer you leave it

When I was younger (so much younger than today), I took out life cover for £500k. How much did it cost? £55/month. 

I took it out to cover me up to the age of 60. My thinking was,
“If I get to 58/59, I should be debt-free and have accumulated enough for my kids.”

I’m not, and I haven’t. 

Is this because I didn’t plan enough or have a personality defect? No. 

It’s because as you age and your family grows, you want to give them—and yourself—the best. Part of that equation means buying bigger houses, and taking out new and more expensive mortgages. 

That’s exactly what I’ve done. And, even now, yes: I stand by every decision I made.

So, in the run-up to 60, I sought to take out a new policy to take me to 70. Boy, did I get a shock?!

If I were to take out a policy today at 59 years old to cover me until I’m 70, it would cost me £750/month. Can you believe that? £750. A month!

Okay. I have a back problem and high blood pressure. But still: £750…?

Take out cover whilst you’re young

This is going to sound like a million clichés [sic], but you don’t know what’s around the corner. No one does. You don’t know what pre-existing conditions are waiting to blossom in later life. 

When you’re in your early 20s, you think you’re invincible.

If only.

If I’d taken out my original policy up to the age of 70 instead of 60, it may have cost me a few pounds per month more. But hardly an amount worth splitting hairs over.

I’d now be happy paying around £75/month, which is how much the initial policy cost of £55 has been affected by inflation since I took it out. And I’d now be safe in the knowledge that my family would still have £500k cover.

I’m neither.

So, using my own example, the one thing I’d advise is: take out life cover when you’re young. The younger the better.

Don’t fall into the trap of saying, “It won’t happen to me.” No matter how old you are, it might already be happening. Now, there’s a sobering thought…

Author: John Yerou

John Yerou is the owner and founder of the award-winning Mortgage Quest Ltd and its subsidiary brands.

In 2004, John began his career in financial services as an independent mortgage advisor and broker. He's since been instrumental in negotiating bespoke mortgage underwriting criteria for professional contractors with many high street lenders.

As such, John's one of the most respected and recognisable names in securing mortgages for the UK's flexible workforce, incorporating independent professionals and the self-employed.

His recognition as the go-to mortgage expert has grown exponentially, reflected in citations and his own publications in both national and contractor-oriented press.

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