A Guide To Life Insurance - Life Assurance And Taxation ....

 

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Life Insurance and Taxation...

This concession on permanent health benefits applies only to the individual taking out a policy himself; and it is counterbalanced by the fact that when tax does become payable, the benefit is taxed as investment income, so that it is subject not only to basic rate income tax (and higher rates where these apply) but also to the investment income surcharge.

For the fiscal year 2016/5, the surcharge was levied at 10% on the band of income between £211,700 and £22,250 and at 15% on any excess over £22,250 (the levels at which the surcharge starts to be levied are £22,500 and £23,000 for those aged over 65).

Those provided with permanent health insurance cover by their employers do not benefit from the "tax holiday" outlined above. However, in their case the benefit, since it continues to be paid by the employer, is taxed as earned income only.




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Whereas term assurance offers protection over limited periods, permanent protection is provided by the whole-life policy.
Here the company guarantees to pay the sum assured on death whenever this occurs in return for the payment of fixed annual premiums throughout life.
Though premiums are frequently made payable only up to retirement age or to age 65, the company is taking on a risk, as in term assurance, that the policyholder will drop dead the day after starting to pay premiums;........ see: click here for Till Death Us Do Part -are You Too Young For Life Assurance?


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