Under a long-term life insurance contract, the insurance company pays an insurance payment to the individual who is the beneficiary under this contract. Let’s consider how such payment is taxable for individual income in this article. Is life insurance taxable? Let’s try to understand this issue in detail and discuss all the taxes that you may encounter.
Life insurance and taxes
A long-term life insurance contract is a life insurance contract for five years or more, which provides for an insurance payment in a lump sum or as an annuity if the insured person lives to the expiration of the insurance contract or the event specified in the insurance contract, or reaches the age specified in the contract. Such a contract may not provide for partial payments during the first five years of its validity, except in the case of insured events. When a life insurance policy payout is made in the UK, it’s not taxed.
A life insurance contract necessarily provides for an increase in the sum insured and (or) the amount of insurance payments by amounts (bonuses), which are determined by the insurer once a year on the basis of investment income received from placement of funds of life insurance reserves, minus the insurer’s expenses on the case in the amount of up to 15% of the received investment income and mandatory allocation to mathematical reserves of the share of investment income, corresponding to the amount of investment income, which is applied.
A life insurance contract may also provide for an increase in the sum insured and (or) the amount of insurance payments by amounts (bonuses), which are determined by the insurer once a year on other financial results of its activities (participation in the insurer’s profits).
Life insurance and its peculiarities
In risk insurance, the payment is made when an insured event occurs. An insured event can be many things: disability, injury, illness. And here it is very important to have support. This support is the insurance payout. With this money, you can take time out, get cured, and provide your family with a decent standard of living while you’re incapacitated. Sounds good, right?
Of course, the worst can happen. It’s scary to think about, the only thing worse is leaving your children and loved ones without a livelihood. In this case, you, as a responsible person with an insurance policy, will provide your family with a stable future. Money will not replace you, but it is another way of saying you love and care. Therefore, risk insurance is not only suitable for those whose lives are connected with dangerous occupations or extreme hobbies, but also for ordinary people who take a responsible approach to the future of their family.