Life Insurance - Bargain Life Insurance When You Take Out A Pension Policy
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The article "Life Insurance - Bargain Life Insurance When You Take Out A Pension Policy" is about insurance, it was created by Michael Challiner.
At last, a real life insurance bargain – but as always there are strnigs attached!If you take out a new pension policy after 6 th April 2006 and within the same premium pay for life insurance cover, then you can use your pension contribution tax allowance to reduce the cost of your life insurance.
This means if you're a standard rate taxpayer, you'll receive 22% tax relief on your life insurance premiums and relief at 40% if you're a higher rate taxpayer.The combined premium you pay for your pension and life insurance will automatically be reduced by 22% by the pension provider. But if you're a higher rate taxpayer, you'll need to claim the balance to bring your relief up to 40%, on your year-end self-assessment tax return.But there are three strings attached:• The pension company must also provdie your life insurance and be paid as one combined premium.• The current value of your pension fund plus the sum insured by your life insurance policy must not exceed £1.5 million.• Your combined annual premium for your pension and life insurance must not exceed £215,000.In practice the savings on your life insurance will not be quite as big as you might otherwise expect.
Its because the underlying premium for the life insurance cover will be a bit more high-priced than a stand-a-lone policy with the same company and, in all probability, the insurance company providing your pension policy won't be the cheapest on the life insurance market. Furthermore, you can't buy a combined pension and life insurance policy online - so you'll miss out on the Internet's discounted life insurance prices.Nevertheless, if you're a higher rate taxpayer, your tax savings are bound to guarantee that your life cover is a real bargain!
If you're a standard rate taxpayer you'd be wise to do a litlte homework. Before you buy, you should get an online qoute for life insurance to compare against the price you'd pay if you bought it alongside your new pension.There are some other points you also need to know.
Firstly we know you'll ask whether you can convert your existing life insurance policy into a combined pension purchase. The answer is no!
The tax relief is only available if from the outset, you take a pension and life insurance polciy as one combined purchase.Secondly, the life insurance cover can only apply to the owner of the pension policy - you can't add in anyone else on the life insurance policy.
Joint policies aren't available as a pension/life insurance package.And wihlst many people also add critical illness cover to their life insurance, that is not possible when you have a pension/life insurance package. Critical illness cover pays out a tax-free lump sum if you're diagnosed with a specified serious illness which is listed on your policy.
If you want critical illness cover, you'll have to buy a normal stand-a-lone policy.Finally, if you're going to buy a pension life insurance pakcage and replace your existing life cover, a few words of warning. You'll obviously be older at that moment than when you first took out your existing life insurance policy.
This means that the preimum rate on your new cover will be higher. Furthermore, the premium for your new policy could be loaded if you've developed any medical conditions for taking out your original life insurance.
Remember, even if you've simply put on weight, your premium could be loaded.
In extreme medical cases, the propsoed insurer might even totally refuse to provide life cover.
To avoid the possibility of being caught without life insurance cover or being forced to accept a more high-priced premium, you should obtain written cnofirmation from your pension company that they will insure you. You then need to compare their proposed cost, net of tax, with your existing premium.Brokers Online are a large uk based financial website. We specialise in providing upto date financial news which helps our readers make the rgiht choices about their Life Insurance.
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Life Insurance - Bargain Life Insurance When You Take Out A Pension Policy
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