Payment protection insurance, which is also commonly referred to as ‘accident, sickness and unemployment (ASU) insurance’, has traditionally charged all applicants the same flat rate, irrespective of their age, occupation, gender and smoking habits.

This had made it attractively straightforward to understand and easy to arrange. But it has also meant that many people have struggled to afford the costs, particularly younger individuals who are still living off modest incomes.

Even the best value independent specialist payment protection insurance providers have tended to charge in the region of £4 a month per £100 of monthly cover, and profiteering banks and building societies have often charged 50% to 100% more than this.

Young people make fewer payment protection insurance claims than older ones because they are less likely to go ill and tend to get a new job more quickly when they find themselves out of work. It is therefore arguably unfair that they should have to cross-subsidise their older counterparts.

The new age-related payment protection product from British insurance does away with this unfairness but still maintains most of the simplicity of standard payment protection insurance. An applicant’s occupation, gender and smoking habits are still disregarded, but the big difference is that their age is taken into account when calculating the payment protection insurance premiums.

Premiums are therefore determined both by the amount of payment protection insurance cover that the applicant chooses and by their age. But it is important to realise that it is only their age at the time of taking out the payment protection insurance policy that matters. Premiums will not increase just because they get older.

The payment protection insurance premium will also vary slightly according to the exact type of age-related payment protection insurance required. It can be possible to have age-related income payment protection insurance, which protects the applicant’s overall lifestyle, age-related loan payment protection insurance or age-related mortgage payment protection insurance – which are linked to specific debts.

In some cases payment protection insurance premiums for the new age-related approach can cost young applicants under half what they would have to pay to take out standard payment protection insurance cover with even the best independent specialist providers.

Nevertheless, like all payment protection insurance, the new age-related payment protection insurance cover from British Insurance contains some significant exclusion clauses that should receive due consideration.

Medical conditions that existed prior to the start of the payment protection insurance policy (so-called ‘pre-existing conditions’) are excluded – although this exclusion is waived if you haven’t suffered from the relevant condition for at least two years from the date on which you first become unable to work.

The self-employed are only covered for involuntary unemployment if they permanently cease trading, and even employed individuals are not covered for voluntary redundancy, which can be a common way of exiting employment in some industries.

Potential payment protection insurance purchasers should also realise that another product known as ‘income protection insurance’, which does not cover involuntary unemployment, can sometimes prove more suitable for those requiring much longer-term health cover.