Contractor Life Insurance

Do I Need Contractor Life Insurance?

While in an employed role, many of us can rely on employee benefits – at least to some extent – to provide protection should the worst happen.

Death in Service schemes provide Life Insurance for employees in large groups; Contractor Life Insurance is very similar, just on a much smaller scale.

When you move into a new role as the director of your own limited company, you lose any employee benefits you may previously have enjoyed. That’s where Contractor Life Insurance can step in.

If you have a family or outstanding liabilities you would want taken care of after you pass away, a Life Insurance policy is an integral part of ensuring this is taken care of.

What’s the Risk of Passing Away?

We’ve taken the example of three healthy men of various ages and calculated the risk of them passing away during the next 15 years using the below Life Expectancy Calculator.

Their risk of death is as follows:

How Much Does Contractor Life Insurance Cost?

Relevant Life Insurance can offer significant savings over personal Life Insurance because the premiums are paid for by the business.

Tax liabilities vary depending upon a significant number of factors, including your personal circumstances.

While contractors should seek advice from an accountant on the specific taxation issues relating to their business, in general terms Contractor Life Insurance:

• Is not classed as a taxable benefit in kind
• Is paid for by the business and treatable as a tax deductible business expense
• Is excluded from both employee and employer National Insurance calculations
• Has a payout that does not form part of your lifetime pension allowance, unlike most group schemes.

Given these factors, Contractor Life Insurance is typically a notably cheaper option than personal cover.

The cost of cover is based on the same underlying issues as for all Life Insurance, including:

• Your age
  The older we are the more likely we are to pass away during the life of the policy and so the more expensive premiums will be
• Your medical history
  Insurers may ‘load’ (increase) premiums based on any pre-existing medical conditions you might have
• Your smoker status
  Smokers are more likely to die prematurely, and so are charged more in Life Insurance premiums
• The amount of cover
  The more you look to cover yourself for, the more premiums will cost
• Length of policy / policy term
  Similar to your age, the older you will be at the end of the policy the greater the risk of you passing away during the policy’s term, which will be reflected in higher premiums.

HMRC, Contractor Life Insurance and Tax

As mentioned, there are significant tax savings to be made on Relevant Life Insurance compared with personal Life Insurance.

These savings are HMRC-approved, providing the primary purpose of the policy is not seen as tax evasion. This is something you’d need to discuss with your accountant, but in the vast majority of cases Relevant Life Insurance is completely HMRC-approved.

Example tax savings on Relevant Life Insurance are laid out in the table below.

Compare Best UK Contractor Life Insurance Companies

	Aegon Aegon was founded as Scottish Equitable in 1831. Dutch insurer Aegon N.V. bought a 40% stake in Scottish Equitable in 1994 and became a 100% stakeholder in 1998. Maximum Cover: Up to age 35: 30 x remuneration Age 36-50: 25 x remuneration Age 51-60: 20 x remuneration Age 61+: 15 x remuneration No financial evidence required for sums less than £2,500,000
	Legal & General In 2015, Legal & General won the ‘Life Insurance Provider of the year’ award from the Personal Touch Awards. Maximum Cover: Age 18-49: 25 x remuneration Age 50-59: 20 x remuneration Age 60-73: 15 x remuneration No financial evidence required for sums less than £3,500,000
	Royal London Royal London began as a friendly society in 1861, later changing to a mutual society in 1908. Today, Royal London is now the UK’s largest mutual life, pensions and investment company. Maximum Cover 30 x remuneration for clients aged under 40 years 25 x remuneration for clients aged 40-49 years 20 x remuneration for clients aged 50-59 years 15 x remuneration for clients aged 60 years+
	Scottish Widows Scottish Widows is a highly praised provider of pension and insurance products across the UK with nearly 6 million customers. Maximum Cover: Level Term: £25 million Increasing Term: £15 million (at point of policy inception, increases permitted to £30 million)
	Zurich Zurich owns locations in more than 170 countries and provides insurance products and services on a global scale. Maximum Cover: Age 16-39: 30 x total remuneration Age 40-49: 20 x total remuneration 50+ : 15 x total remuneration

Get Contractor Life Insurance Quotes & Expert Advice

Drewberry understands contractors and the way you work – we deal with people working this way day in, day out.

We’re also a fully independent insurance adviser and are not tied to any one insurer, meaning we can search the entire UK market to find you the best deal.

Why Speak to Us…

We started Drewberry because we were tired of being treated like a number and not getting the service we all deserve when it comes to things as important as protecting our health and our finances. Below are just a few reasons why it makes sense to let us help.

• There is no fee for our service
• We are independent and impartial
  Drewberry isn’t tied to any insurance company, so we can provide completely impartial advice to make sure you get the most appropriate policy based solely on your needs.
• We’ve got bargaining power on our side
  This allows us to negotiate better premiums for you than you going direct yourself.
• You’ll speak to a dedicated expert from start to finish
  You will speak to a named expert with a direct telephone and email. No more automated machines and no more being sent from pillar to post – you’ll have someone to speak to who knows you.
• Benefit from our 5-star service
  We pride ourselves on providing a 5-star service, as can be seen from our 3635 and growing independent client reviews rating us at 4.92 / 5.
• Gain the protection of regulated advice
  You are protected. Where we provide a regulated advice service we are responsible for the policy we set-up for you. Doing it yourself or going direct to an insurer won’t provide this protection, so you won’t benefit from these securities.
• Claims support when you need it the most
  You have support should you need to make a claim. The most important thing when it comes to insurance is that claims are paid and quickly. We are here to support you during the claims process and make sure it’s as smooth and stress free as possible.

As a contractor there are lots of things to consider when it comes to your financial protection and doing it in the most tax efficient manner.

For help please don’t hesitate to pop us a call on 02084327333 or email help@drewberry.co.uk.

Tom Conner
Director at Drewberry