It seems as though the festive season is well and truly upon us!
As a Contractor, we understand that family is your biggest priority and likely to be at the forefront of your mind this time of year. It’s the same for us too. That’s why, with Christmas around the corner and your contracts wrapping up, now is a great time to review what cover you have in place to protect your family should anything happen to you.
When you work for yourself you don’t get the same benefits as ‘normal’ employees, such as sick pay and death-in-service. Having the right life insurance policy in place will make sure that you and your family are financially safe in all eventualities.
What exactly is life insurance?
Life insurance is designed to provide your family support if you were to unfortunately pass. It gives you the reassurance that they will still be financially secure if anything happened to you. The money paid out is dependent on the level of cover you have chosen and can be paid in monthly instalments or as a lump sum.
If you currently have a mortgage, it’s important to make sure you have a sufficient life insurance policy in place to ensure your family are not left with this looming debt over their heads after your passing. With that considered it’s hard to believe that 42% of mortgage owners do not have a life insurance policy in place.
Not only should you select a cover that is able to take care of the remaining mortgage but one that will cover your family’s household bills and living expenses, making sure that they are able to readjust to normal life after a difficult time.
There are a number of factors that affect the cost of a life insurance premium, such as your age, weight and current health status but, as a Contractor, you could save money by paying for it through your limited company, this is known as Relevant Life Insurance.
What is relevant life insurance?
Relevant life insurance does exactly what regular life insurance does, as it still pays out to your dependents if anything happens, but there is one key difference – it’s tax efficient. As it is taken out by your limited company rather than yourself, it can be claimed as a business expense.
There is no income tax or (in certain situations) inheritance tax to pay so, the amount paid out is exactly what your family will receive – which could be as much as 15x your salary. It is a Contractors form of the ‘death-in-service’ benefit that regular employees receive but it is not treated as benefit-in-kind, nor does it count toward your lifetime pension allowance.
On the whole, relevant life insurance is one of the most tax efficient forms of life insurance, and best of all, it’s designed specifically for Contractors and company Directors.
For advice on securing tax efficient relevant life insurance for yourself, get in touch with our expert advisers.
The information in this article has not been written by Caunce O’Hara & Co Ltd or any of Caunce O’Hara’s employees. None of the opinions or views contained within this article are Caunce O’Hara’s nor do we accept responsibility for any financial advice given within the article.
Caunce O’Hara & Co Ltd do not provide Life Insurance policies nor advice regarding Life Insurance or accounting and bookkeeping.