Contractor Life Insurance

Being a contractor means you may not have the perks of working for a big firm and, you may think advantages such as tax-free life insurance don’t apply to professionals who operate via their own limited companies. If you are a contractor and not part of a huge company, you may just assume that you have to pay your life insurance through your personal account. However, relevant life insurance allows contractors to protect their family and business if they were to die or suffer a terminal illness, with a tax efficient policy.

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Contractor Life Insurance

What is Relevant Life Insurance?

Relevant life is an insurance policy designed to help contractors and business owners. It provides the peace of mind knowing that if you were to die or suffer a terminal illness, your family would not be left to struggle in the absence of a main breadwinner. It currently doesn’t sound much different to standard life insurance, but the difference with relevant life is that you limited company pays the premium, which means you don’t pay the tax and national insurance on the income which would have normally been used to pay for your personal life insurance plan. If the situation arises, the relevant life lump sum payout is put through a trust, so you can be assured your family gets all the funds they were issued, potentially without the need to worry about inheritance tax.

Other company benefits can consist of a company car and private healthcare, which are seen as a benefit in kind and therefore, you pay tax and national insurance on the value of the benefits; which is determined by HMRC. This is where relevant life insurance is different, although you and your family benefit from it, it is not seen as a benefit in kind and therefore, it doesn’t need to be included on your P11D form.

Things To Consider…

You may be thinking that contractor life insurance benefits come at a price, but there are no catches involved, just a few restrictions:

  • The policy has a maximum term to age 75
  • If you don’t pay the premiums, you will not be covered.
  • You are only covered if you were to die or be diagnosed with a terminal illness within the policy period.
  • A relevant life plan will not cover you in the event of a critical illness and contractors should seek out further protection so they are adequately covered if they fall ill.

Why Should Contractors Have Relevant Life Insurance?

Working for yourself or as part of a small business means you can often forget about securing insurance for yourself, however it’s extremely important you do so because it’s likely that you play a large part in the business and earning money for your family. Although it’s a subject that most people like to avoid, it’s really important you take out relevant life insurance because, if the worse did happen, you would like to leave your family and business in a comfortable financial position where they/it could still survive without you.

It’s comforting to know that if something did happen, everything you worked hard for will have the financial support to keep going in your absence.

Relevant Life Policy Premium Benefits For an Employer:

No national insurance payments
Corporation tax relief

Relevant Life Policy Premium Benefits For An Employee

No national insurance payments
No income tax payments

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Contractor Life Insurance
Contractor Life Insurance
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Contractor Life Insurance
Contractor Life Insurance
Personal Net Payment ()
What you have to earn gross including tax to pay the premium ()