Life insurance

I remember asking the client why the policy was taken out when there was no Inheritance Tax (‘IHT’) payable on the deceased’s estate.

This was a pivotal moment in my career, the moment I realised that in order to advise clients around the future, I had to understand the past.

The changes to Agricultural Property Relief and Business Property Relief, announced in the Budget on 30 October 2024, bring life insurance back into sharp focus.

It is all too easy to say that clients can avoid IHT by giving assets away or cover IHT liabilities by selling assets. Some clients simply do not want the prospect of unfunded tax liabilities hanging over them and their families.

We are now factoring insurance into our planning with clients. We typically refer to two types of life insurance here:

1. Decreasing term – typically taken for a set duration, to cover a specific liability which is expected to reduce over time. For example, to cover the IHT liability that would arise if an individual died within seven years of making a gift of an asset (with the liability decreasing from the end of the third year).
2. Whole of life – provides a lump sum on the death of an individual and is typically taken to cover a known IHT liability on the assets in an individual’s estate¹

These tables are kindly provided by One Broker and show indicative premiums for a range of cover levels at different ages².

Whilst the indicative quotes are not insignificant, some clients will be happy to justify paying them for peace of mind for them and their families.

Members must be careful not to stray into providing investment or insurance advice but should be aware of the options open to clients and the right people to speak to for specific advice.

^{1 see also joint whole of life policies which are typically taken out by married couples who intend on passing their entire estates to one another on the first death
2 please note that these premiums are entirely indicative and are subject to market fluctuations, along with being subject to medicals and all other terms of the insurance provider}