Life Insurance as a contractor

[Andrew@Wisteria]

LOL! Well you learn something new every day!

These are (relatively) new. I believe this type of policy has only been around a few years.

[ujjain]

Not sure, as I've already done it, but if you log into the IPSE site then try https://www.ipse.co.uk/futures/assurance it might be on there - IIRC I had to supply my NI number, but could bypass the DD instructions, although the site has changed since I did it. Failing that, ask on their forums and someone will hopefully steer you in the right direction.

Thanks, that was perfect.

[kaiser78]

Relevant Life cover does not cover critical illness, only payment on death. For me CI is just as important as Life cover, as it should be for most contractors, and most CI policies include Life cover, so I have not had to go down the Relevant Life route.

[TheCyclingProgrammer]

Relevant Life cover does not cover critical illness, only payment on death. For me CI is just as important as Life cover, as it should be for most contractors, and most CI policies include Life cover, so I have not had to go down the Relevant Life route.

Critical illness cover is not cheap though. I prefer to cover myself for this eventually by building up as big a war chest as I can manage.

[Freelancer Financials]

The trouble with Life Insurance, I find, is that you're never able to claim on it....

That's true if you not dead! But at least you know with a Relevant Life plan you can treat it as a taxable expense through your limited company.

Premiums paid by your company are not treated as a benefit in kind and no personal tax liability falls on you.

This saves a significant amount of money, especially for the higher rate taxpayer. Moreover, there are no National Insurance consequences for you or your company.

Benefits paid to your dependents under the trust are free of income tax. In most situations, they’re free of inheritance tax, too.

Also worth noting, Relevant Life policies do not form part of your annual or lifetime pension allowances. Most company sponsored death in service schemes will count towards that total.

[Freelancer Financials]

Writing any policy into trust is sonsible (no idea if this is possible with a relevant life policy). This ensures those funds are never part of the estate.

For Relevant Life to work it has to be written into a trust. This is fairly straightforward.

[Freelancer Financials]

Relevant Life cover does not cover critical illness, only payment on death. For me CI is just as important as Life cover, as it should be for most contractors, and most CI policies include Life cover, so I have not had to go down the Relevant Life route.

Not anymore. Only recently this has changed and you can also include Critical Illness as well as Life. It's taken a while for this to happen but it's arrived. Not all providers are offering it.

[Freelancer Financials]

Critical illness cover is not cheap though. I prefer to cover myself for this eventually by building up as big a war chest as I can manage.

I'm not sure who quoted you but it actually works out cheaper than a standard life policy. If you are over 50 and have pre-existing medical conditions then that could load the premiums. I agree that it's important to also build a war chest but I honestly believe it is also important to have another back-up plan.

[Freelancer Financials]

I guess if I ever stop contracting, it's not possible to transfer the life insurance from company owned to personal-owned either, right? Because if after 10 contracting you stop... your life insurance premium would go up massively, that'd be a great. Young people = cheaper life insurance.

Not true.

First, the trustees can appoint the plan back to you. You can then carry on the cover as a personal policy. In that instance, you could also put it under a personal trust for the benefit of your dependents, if that’s what you wanted.

Or, if you move back into an employed role, you could ask the new employer to take over the policy and trust. If they agreed, you’d need to change the trustees to your new employer.

There’s also the chance that your new employer has their own scheme. Having a Relevant Life policy doesn’t stop you from joining that, too. You can continue your policy alongside theirs to give your dependents even more benefits.

Likewise, if you went back to being a contractor, then the reverse can happen. You change the trustee back to your company and pick up where you left off.

I hope that helps.

[TheCyclingProgrammer]

I'm not sure who quoted you but it actually works out cheaper than a standard life policy. If you are over 50 and have pre-existing medical conditions then that could load the premiums. I agree that it's important to also build a war chest but I honestly believe it is also important to have another back-up plan.

I'm not over 50. I pay £20/month for my life assurance. Adding critical illness more than doubled it.