The UK's protection gap is most pronounced among younger adults, the Financial Conduct Authority (FCA) said in January. The regulator's review found 58% of UK adults do not hold a pure protection product, such as life insurance or income protection. Pure protection products provide financial support after death, serious illness or loss of income, and carry no savings or investment element, the FCA said.
For consumers who already hold cover, the regulator said the market mostly works well. Most can claim when needed, and the cost of cover has stayed stable in recent years, the FCA said.
Graeme Reynolds, director of competition and interim director of insurance at the FCA, said many more people could benefit from protection cover. "We will work with industry to reduce this gap," Reynolds said.
Separately, Legal & General (L&G) has published guidance for this age group, citing a sharp difference in premiums by age. A 20-year-old, non-smoking applicant seeking £150,000 of cover over a 25-year term is quoted a monthly premium of £5.89, according to L&G's guide. The same cover costs £17.80 a month for a 40-year-old, more than three times as much.
L&G's premiums stay level for the length of the policy, so buying early avoids price rises linked to age or future illness, the guide states.
FCA research suggests the gap exists partly because consumers are unaware of their need for cover and are rarely prompted to consider it. Affordability, misunderstanding of products and gaps in the sales process were also cited as barriers.
The findings come from the FCA's MS24/1.4 study into the distribution of pure protection products to retail customers, part of a wider competition review. The regulator said it will examine updated 2025 data and explore ways to improve product switching ahead of its final report. The FCA is accepting feedback on its interim findings until March 31 and plans to publish a final report in the third quarter of 2026.
L&G's guide stresses that age alone should not drive the decision to buy cover. Cover becomes more relevant once a partner, children or other family members depend on the applicant's income for daily costs such as bills or childcare.
A mortgage, marriage or civil partnership, and financial dependants are among the factors the guide lists as relevant to the decision. The guide also asks whether a partner already holds life insurance and whether a joint policy might suit a couple.
L&G's guide also recommends that young adults use the insurer's life insurance calculator to work out how much cover they need. Decreasing life insurance protects a repayment mortgage, with cover reducing roughly in line with the mortgage balance, the guide says.
This structure can make it a cheaper option than level cover, according to L&G. This pattern is consistent with findings from the FCA’s 2024 Financial Lives financial inclusion survey, which tracks protection take-up among mortgage holders. L&G's standard life insurance can pay a cash sum if the policyholder dies or is diagnosed with a terminal illness during the policy term.
A terminal illness is defined in the guide as a life expectancy of less than 12 months. Critical illness cover can be added to either policy for an extra cost at the time of purchase. It can pay a cash sum on diagnosis of a specified critical illness, provided the policyholder survives 14 days from diagnosis.
