How does Relevant Life Insurance protect your family?

22nd July 2019

If you’re worried about how you can protect your family’s financial future, Relevant Life Insurance could be part of the solution. Whether you’re the breadwinner in your household or a full-time parent, insuring your life (tax efficiently), could make a big difference in a difficult time.

Relevant Life Insurance works in the same as regular Life Insurance, providing your family with a large, tax-free, cash sum if you were to pass away during the policy period. The difference is that Relevant Life Insurance is designed for Contractors and company Directors.

A Relevant Life Insurance policy is paid for by a limited company on behalf of an employee. As a Contractor, if you operate as a limited company you can take out the policy and the premium will be treated as a business expense, reducing your overall corporation tax liability. Not only that – it will not be seen as a benefit in kind.

Here’s how Relevant Life Insurance can protect your family:

• It helps your family to repay any remaining debt that you may left. This could include the mortgage, credit cards, loans and any car finances
• They can choose to have the policy paid out all in one or in smaller monthly instalments
• The payout will help compensate for the loss of your income – which could be a lifeline if you’re the main breadwinner

Relevant Life Insurance, trusts and probate

You could help your family get access to the payout faster by writing your Relevant Life Insurance policy into a trust.

A trust allows you to give your assets to your beneficiaries. In the case of Life Insurance, your partner, children and anyone else nominated in your trust will still receive a payout in the event of your passing. However, it could help them sidestep a large inheritance tax bill. In some examples, the payout from standard Life Insurance could form part of your estate and is therefore taxed at 40% after your personal allowance (£325,000). By writing your Life insurance policy into a trust your family may be able to bypass or reduce the inheritance tax bill as the value of your cover will not be included in the calculation of your legal estate.

The other benefit of writing your Relevant Life Insurance policy into a trust is that it will prevent your family from going through the long probate process. Going through probate can be a very confusing and stressful time, especially if there is a complicated will or no will at all. In the UK, the probate process could take between 6-9 months. During this time, your family could fall into mortgage arrears or other financial difficulties. By writing your Relevant Life Insurance into a trust, all your family need to access the money is the death certificate. This means that they do not have to overcome another challenge during an already painful time.

Find out more about Relevant Life Insurance here.

Protect your family today by getting your Relevant Life Insurance in order. Our expert Contractor Protection advisers can help you find a policy that suits you, your family and their future. Get in touch today.
 

All content is accurate at the time of publication