Really, it can be! Well, if you’re a Limited Company Director, it could be. We wanted to share how you could potentially be overpaying for your life insurance because paying more for something when you don’t need to really is annoying.
The protection industry caters for specific covers for both personal & business clients alike, and as advisers, we’re able to navigate those waters to ensure you receive the right cover for your requirements.
The specific cover that could potentially best suit Limited Companies is called Relevant Life. Essentially, this a tax efficient life insurance plan which pays a lump sum to your beneficiaries, in the event of your death within the policy term. Now, this might sound familiar to the cover you may potentially have for your mortgage or family protection. However, for Limited Company Directors there’s some intriguing factors which you may want to know.
These factors are actually very simple. If you’re a Limited Company Director, or you’re employed by a Limited Company, then, due to its unique tax treatment, a Relevant Life Plan could suit your protection planning for life insurance much better. To help compare, we’ve looked at two comparison quotations. The first shows a Personal Life Cover being paid for personally by you, and the second shows a Relevant Life Plan, being paid for by the Limited Company. The cover amount is based on £500,000 of life insurance and having cover in place until age 67. The client is a 45-year-old male, non-smoker.
Premium for Personal Life Cover – £54.31 per month
Premium for Relevant Life Cover – £40.73 per month*
As you can see, the same level of cover, the same client, the same scenario. By opting for a Relevant Life Plan, this would provide you with a cost saving of £3,585.12 over the term of the plans.
To make this more attractive, the saving is even higher if you opted for a Relevant Life Plan. The reason being you would save on the tax that you’d usually draw from your Limited Company to pay for your personal life cover through your earnings, as the company pays the premium for the Relevant Life plan. This ensures that you’re being as tax efficient as possible with your life insurance needs & requirements.
Thank you for taking the time to read this article.
Written by Ryan Ferrara of Talk Mortgage Broker
*The lower premium takes into consideration this tax treatment and includes the corporation tax saving at the basic rate of 25%. The saving will differ based upon the companies’ circumstances with their corporation tax rate.
HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.
Talk Mortgage Broker Ltd is an appointed representative of The Openwork Partnership, a trading style of Openwork Limited which is authorised and regulated by the Financial Conduct Authority. The Openwork Partnership offer investment and insurance advice on products from a limited number of product providers and mortgage advice on a comprehensive range from across the market.
Approved by The Openwork Partnership on 08/02/2024.
