Life insurance for directors

Lucyadams184

My husband has just set up his own company. We were wondering if anyone knew if he has to take out seperate life insurance under the company and how much it might cost and what the implications would be if he didn't do this. Thanks.

weighty1_2

I doubt he "has" to take out separate life insurance under the company, however, he "may" be able to take out separate life insurance through his company which is arranged in a more tax efficient way than paying for a policy via a personal bank account from post taxed salary.

It's called a Relevant Life Policy, however, you'll likely have to use an IFA or protection specialist to arrange this. There shouldn't be any upfront fees for doing so as they should be paid commission from the insurer for setting it up.

In terms of cost it's like asking how long is a piece of string. It depends how much cover you husband wants, over what term and what his health is like.

kingstreet

What would be the purpose of such cover?

For example, who would be the intended beneficiary?

InsideInsurance

Lucyadams184 wrote: »

My husband has just set up his own company. We were wondering if anyone knew if he has to take out seperate life insurance under the company and how much it might cost and what the implications would be if he didn't do this. Thanks.

No he doesnt have to take out any life insurance as a director.

The company can choose to take out life insurance on him with the company itself being the beneficiary (eg Key Man) or with the money to go into trust and the trustees deciding the beneficiaries (Relevant Life)

The former is only really going to be applicable if the company would outlive him. If he is a contractor and operating through a Ltd then evidently it wouldnt and so this class of insurance is not worth considering generally. If he's setting up a shop then it probably would outlive him in which case it may be worth having - the idea is its used to get a temporary replacement etc when he's not able to carry out his duties or cover loss of business

The second is possibly what you're thinking of because he can define you as the trustee and so effectively it is a personal policy that the company is paying for and at the moment these are tax deductible for the company (in most cases) and dont attract BIK tax. That said, there are less players in this market so premiums can be higher due to lack of competition.

jenniemiller177

As has been said, no he doesn't have to take out life insurance as a director. There are benefits though. A previous forum discussion shows some of these here.
https://forums.moneysavingexpert.com/discussion/4507505

ACG

I think inside insurance posts covers off pretty much everything.

He doesnt have to, there can be tax advantages of doing it through the business if he has a need (ie, if anyone would be financially worse off in the event of his death).

Lucyadams184

I just wanted to say thank you for all of your responses. My husband has just joined his family business and was advised it wasn't essential to take out the insurance but that it would be a good idea as hopefully one day it will be his.