Relevant Life Insurance inside / outside IR35

[Whorty]

Wife no kids, she earns significantly less than me and could not afford the mortgage on her own, the life insurance would go down with the mortgage.

I agree I do need to speak to an IFA, can you recommend one?

You definitely need life insurance then, to cover the mortgage and also to give her enough extra to service the cost of living in the house if her salary alone means she may not be able to stay there. Nothing worse than losing a partner, then also being forced to move out the house at a time when grief is at it's worst.

If the worst does happen, then you don't want your wife having to worry about money at a time when life for her will be so bad. It's not just the mortgage, it's costs of living, sorting out the funeral (they aren't cheap), probate (if she gets someone to do it for her, although if your finances are fairly straight forward she could do this herself).

Sort out a will too if you haven't got one. Doesn't have to be complex, as your wife she will be entitled to your estate even without a will, but having one will save a lot of time, cost and heartache.

Your IFA should be able to advise on all this.

I can't recommend an IFA but others have .... probably call a couple and go with the one you feel comfortable with

[ladymuck]

I use Ian Wilson at Forum Wealth, a couple of others here do too.

http://forumwealth.com/our_team

[mrjaywarren]

Wife no kids, she earns significantly less than me and could not afford the mortgage on her own, the life insurance would go down with the mortgage.

I agree I do need to speak to an IFA, can you recommend one?

[Whorty]

So I'm assuming the max 30x salary limit is a HMRC requirements?

Must confess, I've never heard of a limit in a life insurance policy. Feel free to link to where you got this info from, but as far as I understand it (and trust me, I'm no expert) you can insure your life for as much as you like and your premiums will match that (if a personal policy).

Maybe it's different if you're a director and the Co. is paying? Is it linked to death in service?

Really does sound like you need proper IFA advice rather than relying on a bunch of strangers on a forum who are guessing and don't know your circumstances (you still haven't said if you have kids, wife, partner, how much mortgage is (do you have a policy against the mortgage?).

So many unknowns.

[mrjaywarren]

Life insurance is not related to your salary. An IFA will tell you this. To be honest so would a broker so yours is a bit sh*t.

All IFAs are heavily regulated these days so there aren't many bad ones.
If you want me to provide a personal recommendation (my IFA and a personal friend of over 10 years) then PM me.

So I'm assuming the max 30x salary limit is a HMRC requirements?

[Whorty]

Which kinda links in nicely to the other thread about contracting in a recession - know your burn rate, don't live your life on borrowings.

Totally ... my late wife was an IFA, and had done roles as a wealth manager, so i'm kind of lucky that I had all that for free .... I'm only in the position I am now because of her knowledge and planning. She was the clever one. A good IFA for people like us is so worth it.

[Lance]

Hi Lance,

I have a large war chest, so i can pay the monthly insurance bill but I worry if they will need to validate my actual salary if I die during the cover in order to determine how much to actually pay out? Or is it just based on the figure it would be today based on salary and there's no need to validate if I die?

I don't have an IFA, I've been contracting for 7 years now and just kept to maxing out my pension each year and sensibly paying myself via dividends and salary. Is there a recommended IFA list or can you recommend anyone?

Life insurance is not related to your salary. An IFA will tell you this. To be honest so would a broker so yours is a bit sh*t.

All IFAs are heavily regulated these days so there aren't many bad ones.
If you want me to provide a personal recommendation (my IFA and a personal friend of over 10 years) then PM me.

[mrjaywarren]

If there’s enough money in the company it can pay for relevant life cover immaterial of you have another actual job.
but life insurance is long term, so maybe you should consider what you’ll be doing in 2/3/4/5 years and make a decision based on that.
Relevant life cover is tax efficient but not necessarily the best cost. When your company runs out of money you might have the wrong insurance.

your IFA should help with this. Don’t use a broker as they are just selling a product.

Hi Lance,

I have a large war chest, so i can pay the monthly insurance bill but I worry if they will need to validate my actual salary if I die during the cover in order to determine how much to actually pay out? Or is it just based on the figure it would be today based on salary and there's no need to validate if I die?

I don't have an IFA, I've been contracting for 7 years now and just kept to maxing out my pension each year and sensibly paying myself via dividends and salary. Is there a recommended IFA list or can you recommend anyone?

[WTFH]

True ... but that's more to do with sorting your finances out in general than life insurance to clear mortgages etc. But you are right, it is all about estate planning etc and a good IFA will help with this ..... rather than us random strangers on a forum.

Which kinda links in nicely to the other thread about contracting in a recession - know your burn rate, don't live your life on borrowings.

[Whorty]

I would add that 'dependents' aren't the only consideration.

If OP dies and leaves a large mortgage, and no life insurance, the next of kin, whether dependent or not has potentially inherited a problem. It's unlikely to be negative equity, but these things take time and if the mortgage payments aren't maintained, and the house is repossessed it become very painful for a parent/brother/sister/cousin etc.

True ... but that's more to do with sorting your finances out in general than life insurance to clear mortgages etc. But you are right, it is all about estate planning etc and a good IFA will help with this ..... rather than us random strangers on a forum.

[Lance]

I would add that 'dependents' aren't the only consideration.

If OP dies and leaves a large mortgage, and no life insurance, the next of kin, whether dependent or not has potentially inherited a problem. It's unlikely to be negative equity, but these things take time and if the mortgage payments aren't maintained, and the house is repossessed it become very painful for a parent/brother/sister/cousin etc.

[Whorty]

Lady M makes a very valid point .... if you have no dependents then life insurance is a waste of money. If the policy is paying out, you're dead, so not going to benefit.

If you have wife/girlfriend in your house/children then life insurance is a different matter. As it's not that expensive really, do you need to put it through the company to save pennies but create a potential ball-ache in a few years time?

Something else to consider is critical illness cover. Definitely speak to your IFA about that. Whether single or in a relationship with dependents, that's worth a serious look at.

[ladymuck]

+1 for an IFA

Mine made me realise that life assurance is useless for me as I don't have any dependents who need looking after. If you're married and have (or plan to have) kids then life assurance can be the right product.

If what you're really worried about is burning through your warchest should you become ill, then what you really need is income replacement insurance. This is what I have and it'll pay out around £4k a month after a six month wait. My warchest will cover me initially and then the insurance will kick in.

You will pay for an IFA's time, but they will also advise you that this is an allowable expense if they are one that knows the contractor way of working.

[Lance]

If there’s enough money in the company it can pay for relevant life cover immaterial of you have another actual job.
but life insurance is long term, so maybe you should consider what you’ll be doing in 2/3/4/5 years and make a decision based on that.
Relevant life cover is tax efficient but not necessarily the best cost. When your company runs out of money you might have the wrong insurance.

your IFA should help with this. Don’t use a broker as they are just selling a product.

[mrjaywarren]

Hi Guys,

I am in the process of buying a new house and I thought it would be sensible to purchase a life insurance policy, I understand this is very tax efficient via the LTD company but my contracts may switch between inside and outside of IR35, I am wondering how this impact the policy.

I'm allowed up to 30x (max) salary of 50k (salary and dividends) but once on a contract inside IR35 I won't be able to demonstrate the same salary from the business, I am wondering how this would impact the policy. I can switch the policy to a personal policy (employer to employee) but can I then switch it back once back outside of IR35?

I have been speaking with a broker but it seems this is the only option as no other life insurance policies/products would accommodate switching inside/outside.

Any advice or suggestions?