Contractor Life Insurance
Regardless of the job you have and whether you own one or ten businesses, everyone wants to protect their family financially if the worst was to happen to you. However, your job title can influence the type of life insurance you are eligible for.
As a contractor, you probably think tax-efficient life insurance gained through a business is worlds away because you don’t personally belong to a large corporate company. However, this couldn’t be further from the truth as contractors can also qualify for tax-efficient life insurance with relevant life cover.
What is Relevant Life Insurance?
Relevant life insurance is a tax-efficient form of life insurance available to business owners and contractors. The purpose of contractor life insurance is similar to that of traditional life insurance. You can never predict what will happen in life and although it doesn’t bear thinking about, having life insurance in place so your family are protected financially if you were to die is imperative. With relevant life insurance, the premiums are paid through the business. Even though you are benefitting greatly, it isn’t classed as a benefit in kind and you do not pay any tax or national insurance on the premiums. This is because HMRC deems relevant life insurance as an allowable business expense.
Your family will also benefit greatly from this form of contractor life insurance because if the situation arises, the lump sum payout is put through a trust, so you can be assured that your beneficiaries get all the funds they were issued, potentially without the need to worry about inheritance tax.
Factors To Consider with Contractor Life Insurance
In order to claim life insurance with tax efficient benefits for you and your family, there are a few factors that you need to consider:
- A relevant life policy has a maximum term age of 75.
- Relevant life does not cover you in the event that you fall ill during the policy period, for this level of cover, you will need to seek out a critical illness policy or income protection.
- If the premiums aren’t paid, your family won’t be covered.
- Relevant life is a business only form of insurance and cannot be used solely for personal reasons. This is because the tax-efficient element is approved by HMRC for business purposes only.
The Importance of Contractor Life Insurance
As a contractor operating a limited company, you will know all too well about responsibility. Often, the hectic life of a business can overshadow the important steps you need to take in order to protect yours and your family’s future. It’s likely that you play an important financial role in the household and if you are pondering over the importance of contractor life insurance, then it’s worth considering your beneficiaries future if they were without your income.
If this is an uncomfortable thought, then you should consider investing in life insurance so you can sleep well at night knowing everything you worked hard for will have the financial support to keep going in your absence.
Other Forms of Contractor Life Insurance
As well as relevant life insurance, contractors are of course eligible for other forms of life insurance. The two main forms of life insurance are term cover and whole of life cover, both of which differ depending on the time frame you are looking to be covered for.
Term cover – as the name suggests, term cover is a type of policy that only covers you for a certain period of time and that period is decided by you. For as long as the contract states, your family will be fully covered but once the contract ends, you will no longer be protected.
Whole of life cover – for a more stable and guaranteed approach, whole of life cover may be more suitable. Your family will be covered for the entire duration of your life, as long as you have paid all your premiums and you are up to date.
Want To Find Out More About Contractor Life Insurance?
If you are a contractor and are looking for a tax-efficient form of life insurance, or perhaps just more advice on the products available on the life insurance market, then contact us today.