Life insurance coverage – Bargain Life Insurance When You Remove A Pension Policy

At last, a real life insurance bargain – yet as always there are strings 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 share 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 plus relief at 40% if you’re better pay taxpayer.

The combined premium you pay for your pension and insurance coverage will automatically be reduced simply by 22% by the pension provider.
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In case you’re a higher rate taxpayer, you’ll need to declare the balance to bring your relief as much as 40%, on your year-end self-assessment tax return.

But there are three strings attached:

o The pension firm must also provide your life insurance and become paid as one combined premium.

um The current value of your pension account plus the sum insured by your life insurance coverage must not exceed £1. 5 mil.

o 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 very as big as you might otherwise expect. Its because the underlying premium for the life insurance coverage cover will be a bit more expensive than the usual stand-a-lone policy with the same corporation 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 overlook the Internet’s discounted life insurance prices.

Nevertheless, if you’re a higher rate taxpayer, your own tax savings are bound to ensure that your life cover is a real bargain! If you’re a standard rate taxpayer you would be wise to do a little homework. Before you buy, you should get an online quote for life insurance to compare against the price you’d pay in case you bought it alongside your new pension.

There are some other points you also need to know. First of all we know you’ll ask whether you are able to convert your existing life insurance policy into a combined pension purchase. The answer is not any! The tax relief is only offered if from the outset, you have a pension and life insurance policy as one combined purchase.

Secondly, the life insurance cover can simply apply to the owner of the pension plan – you can’t add in anyone else in the life insurance policy. Joint policies aren’t offered as a pension/life insurance package.

And whilst many people also add critical illness cover to their life insurance, this is not probable when you have a pension/life insurance bundle. Critical illness cover pays away a tax-free lump sum if you are diagnosed with a specified serious illness which is listed on your policy. If you want important illness cover, you’ll have to buy a regular stand-a-lone policy.

Finally, if you’re going to buy a pension life insurance package plus replace your existing life cover, a few words of warning. Likely to obviously be older now compared to when you first took out your existing life insurance coverage. This means that the premium rate on your new cover will be higher. Additionally, the premium for your new plan could be loaded if you’ve developed any medical conditions since taking out your unique life insurance. Remember, even if you’ve simply put on weight, your premium could be loaded. In extreme medical instances, the proposed insurer might even completely refuse to provide life cover. To prevent the possibility of being caught without insurance coverage cover or being forced to accept a far more expensive premium, you should obtain written confirmation from your pension company that they can insure you. You then need to evaluate their proposed cost, net associated with tax, with your existing premium.

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