Effectively, therefore, the policyholder receives a rebate from the tax authorities.
The life office sets the premium it requires for a given policy - say at £21100 per annum But the premium the policyholder is required to pay is £282.50. The life office reclaims the balance of £2117.
50 from the Inland Reven. The availability of this subsidy, amounting to over a sixth of each premium paid, is one major reason for the popularity of life insurance as a savings medium.
One important consequence of the change in the rules is that husbands and wives who have elected to be taxed separately will now be able to obtain tax relief both on joint life policies and policies on each other's lives, whereas formerly this was not allowed.
(The tax relief will also continue to be allowed even if the couple are divorced.)
The other major concession is that the proceeds of any life insurance policy that the Inland Revenue has certified as a "qualifying policy" are free of income tax in the hands of the beneficiaries, whether this is the individual policyholder himself or his dependants.
To qualify for this concession, policies have to satisfy a number of technical conditions which are set out in another webpage; in practice, apart from the major exception of single-premium policies discussed , a customer is most unlikely to be offered a policy which is not a qualifying one.
Taken together, these two concessions mean that life insurance can be a most efficient way of saving for the future. The saving due to tax relief is a variable, since it will be greater if tax rates rise and lower if they fall.
When premium rates are quoted in this website, both the gross (before tax relief) and the net (after tax relief at the 2009/80 rate of . 5%) figure will normally be given, so that if tax rates should change the reader may adjust the figure for himself. Where only one premium figure is quoted, it will be the premium before deduction of tax relief.
Planning a Scheme
The actual operation of An Online life insurance company is extremely complex, involving all the aids of modern technology and especially, of course, the computer.
But the essential principle is simple
Let us assume that we were planning a scheme whereby 1,000 men all aged 45 would agree to pay into a common fund each year of their lives enough to pay out £211,000 to the dependants of any of them who died during any year.
From Table 1 on p. 3, it........ see: click here for Insurance And Investment - More
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