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Life insurance premiums set to fall

Date: Mon, 10 Apr 2006

The recent arrival of A-Day could mean the cost of life insurance reducing by around a third.

It is estimated that millions of people could find life insurance policies more affordable as premiums could be paid from untaxed income, reports the Mail on Sunday.

Prior to the new changes, it was only possible for consumers to purchase a limited amount of life cover via their pension. However, there is no longer any cap and pension term assurance can now be provided via a separate policy.

Kevin Carr, head of protection strategy at specialist adviser Lifesearch, explained: 'The insurer will collect basic-rate tax relief on behalf of the insured. This means that if the insurance costs £100 a month, you pay in only £78. Top-rate taxpayers claim back the extra tax relief at the end of the year."

Although this form of life insurance is more expensive for providers to oversee, the increased premiums will actually fall because of the new tax breaks. It is estimated that premiums could be between five and 15 per cent lower for basic-rate taxpayers, whilst higher-rate taxpayers could save around 30 per cent.


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