Pension Tax Assurance Has Tax Benefits
Summary
There are various sorts of life insurance cover cover available in the market. Many people are now reaping the benefits of more economical monthly premiums by changing to pension term assurance (PTA) because of the tax relief on the cost of this type of policy. It is not, however, suitable for everyone.
Recently it was revealed that the cost of life insurance has reduced big style in recent years. So what type of insurance plan is best for people like you?
Term plans are the simplest and cheapest typeof life insurance - you pay a monthly premium for an agreed amount of life insurance for set number of years that the policy will be in force for. If you were to die during the plans’ term, it then pays out a tax free cash sum. If the policy reaches the end of its term and you are still alive, no money is paid out.
There are several sorts of term insurance: “level” term is where the payout is a set amount; “decreasing” term, which is often slightly cheaper because the cash to be paid out reduces each year. Usually this sort of insurance plan is taken out to insure a mortgage.
Another option is “increasing” term insurance where the amount payable increases slightly during the course of the term ; this can be an excellent way of protecting your familyagainst inflation.
Joint life plans are very benefitial for couples who want both of their salaries to help pay the mortgage because a payout is made if either policyholder dies.
Family Income Benefit offers the plan holder’s beneficiaries an annual, quarterly or monthly income from from the date the policyholder dies until the policy terminates rather than paying out one lump sum.
The amount of insurance you need will depend on your own individual position. Most large and medium-sized organisations offer a death in service benefit which can sometimes pay as much as 4 times your annual salary to your partner if you die whilst being employed. Hence if you are reasonably confident about remaining in employment, you may reach the conclusion that paying for more life insurance with another arrangement was wasteful.
The cost of life insurance depends on a selection of factors, namely the type of policy, the length of its term, and certain health criteria, and certain medical issues - whether you are fat or whether you smoke. Insurance underwriters are also clamping down on obesity in particular.
There are major advantages to switching to pension term insurance. If you already have a term insurance policy which pays out a tax free cash sum, you can make savings on your premiums by changing to a pension term plan. The reason is because under new pension laws, most people qualify for tax relief on the money they pay for life insurance if they opt for a pension term assurance (PTA) policy. PTA is basically the same as standard term insurance cover in so far as it is still protection-only. So it pays out if you die within the term but if you live to the end of the insured period, the policy has no value.
However, some people will not benefit from switching to PTA. For example, if you purchased your life insurance plan a long time ago, the higher premiums that you may now have to pay owing to the increase in your agecould well outweigh the benefit of tax relief. Similarly, if your health has worsened since you purchased your plan, you will probably be better off staying with your existing life insurance policy.
Filed under: John's Message