A Guide To Life Insurance - Partnerships ....


Find Out More



Tax problems often arise in connection with partnerships, where the partner who retires or dies is due to receive a capital sum corresponding to his share in the partnership.

In most cases, providing this out of the current funds or earnings of the partnership is difficult if not impossible, and in an extreme case there may be no alternative to breaking up the partnership to release the money. Life insurance is a most convenient way of ensuring that such capital sums are readily available.

Apart from the obvious benefit that capital sums provided through insurance policies are free of income tax, partnership insurance also allows for an equitable sharing of the costs of protecting the future of the partnership among its members.

The normal method of doing this is for each partner to insure his life under trust for the other partners. The lowest cost method involves the use of term assurance but for long-term planning with investment benefits the better alternative may be the with profit whole-life policy.

Since the youngest partner, who stands to benefit most from the continuance of the partnership, will pay the lowest premium, some adjustment is necessary.

This may be done by reapportioning the partnership earnings when the policies are taken out, so that the oldest partner, paying the largest premium (and standing to derive least benefit from the scheme), draws a larger proportion so as to reduce the net cost to him of the policy.

This method ensures that each partner is able to claim tax relief on the premium he pays, as the policy is on his own life. It is also possible for each of the partners to insure each other's lives, but in this case tax relief is not available.

Another possibility is for a joint whole-life policy to be arranged to cover all the partners, the sum assured being payable on the first death.

2015 - Guide To Life Insurance - More on ....

Other readers found these pages interesting


Read On: click here for Getting The Best Value

The with profit policy, as we saw earlier, may have surplus allocated to it in several different ways.
Reversionary bonuses will be added every one, two or three years to the basic sum assured, and the effect of a compound bonus rate is that the rise in the claim value of the policy grows more rapid as time goes on. Fig. 3 shows the effect of this for a younger man taking out a with profit policy.
The surrender value in the early years is low in relation to the total of premiums paid......... see: click here for Getting The Best Value


Our insurance website is an independent marketing website which acts as an introducer to 'whole of market' companies who offer specialist Independent Financial Advice. Each company is authorised and regulated by the Financial Services Authority.


We are not authorised to give advice and we are not liable for any financial advice provided by, or obtained through a third party. The information published on this website is for information purposes only. This site has been approved for compliance purposes by a Firm of Independent Financial Advisors who are authorised and regulated by the Financial Services Authority (FSA). The Chartered Insurance Institute

Giving power to the reader...

  • To contact us, send an email and we will get back to you as soon as we are able. If you are looking for independent life insurance quotations then click here. If you are looking for any of the folliowing: Car insurance
    Bike insurance, Travel insurance, Home insurance, Life insurance, Landlord insurance, Pet insurance, Medical insurance, Dental insurance, Business insurance please click here

  • Have something to say?
    We publish financial articles on this site if they fulfil our requirments. more>>