Existing Life Insurance - potential problem areas
We often come across existing life insurance that is set-up in a less than ideal manner.
Just a few examples of existing cover not arranged ideally are:
- A joint life policy, instead of two separate policies
- An older policy, may be more expensive than current policies
- A policy with a large cash value which will be kept by insurance company in event of a death claim
- Existing cover not in trust
- Existing policy is in trust, but premiums are being paid from a joint bank account
- Issues of non-disclosure when original policy was taken out
MORTGAGE LIFE INSURANCE NOT IN TRUST EXAMPLE:INHERITANCE TAX FACTS:
Let's say you have a mortgage of £200,000 and that your estate is already above the nil-rate band. You have a £200,000 life insurance that will pay off the mortgage, but it's not in trust. In the event of your death, because it is not in trust, your £200,000 life insurance is paid into your estate, wiping-out the £200,000 mortgage debt that would otherwise have reduced the estate. If your mortgage life insurance IS placed in trust, it will NOT be included in your taxable estate. The above £200,000 mortgage therefore REMAINS a DEBT AGAINST YOUR ESTATE and REDUCES your taxable estate by £200,000 saving your family £80,000 in Inheritance Tax. |
We will check your cover, alerting you to any 'problem areas' that may exist and offer a solution.
NOTE: Any existing life cover should always be retained, in case any health problems that may have occurred since you took your original policy out make it difficult or impossible to have new cover.
