Directors’ life insurance | Splinter

Directors’ life insurance

I have met a great number of business owners, and I have found that there is often a disparity between their personal and business financial arrangements.

Running a business can be tough. When the business is going through a difficult period, sacrifices have to be made. The business owner will seek to reduce both the costs of running the business and their personal expenditures. Often, the first thing that is cut is their life insurance.

Why cut the cost of life insurance?

We all live in a bubble of optimism, forgetting that bad things can happen to nice people.

The business owner’s focus is on temporary cash flow issues within the business and feeding their family.

Yet as a director of the business and a responsible employer, they are providing death-in-service life insurance of up to 4 times the salary of their employees.

The family of a dead employee, who was on a salary of £100,000 per year, would receive £400,000. That’s a decent sum and probably enough to make sure they can remain comfortable when they’re no longer around.

What does this mean for the director’s family, whose life insurance has been cancelled?

The risk of their loved ones being left with nothing—what happened to those hollow promises, “to have and to hold from this day forward”?

As the head of your family, you should put your family first and your business second.

You have a responsibility to make sure that if disaster strikes, you’re leaving those you leave behind with security and stability.

The good news is that there is a great benefit available to business owners when it comes to life insurance.

As a director of a limited company, you can take out life insurance through the company.

Like pension contributions, this will be an allowance expense, which will reduce the company’s corporation tax liability.

The smart thing to do is to arrange your life insurance through the business, with the business paying the premiums. It will not be treated as a benefit in kind (if arranged correctly).

And any benefit will be paid to your family free of tax.

Registered in England and Wales. Registered Number 5553273.
Registered Address: 8f Millars Brook, Molly Millars Lane, Wokingham, Berkshire, RG41 2AD.

A pension is a long-term investment that typically cannot be accessed until age 55 (57 from April 2028). The level of pension benefits offered could change depending on the value of your investments (and any income they may generate).

The interest rates in effect at the time you begin receiving benefits may also have an impact on your pension income. The tax consequences of pension withdrawals will depend on your unique situation. In later Finance Acts, tax rates, tax bases, and tax relief may change.

The opinions expressed by Ray Best are meant to inform and educate. Before making any investment decisions always take advice that is pertinent to your investment personality and financial situation.

You are aware that past performance will not necessarily be repeated in the future, but you should be aware that persistent poor performance invariably will.

The value of an investment and the income from it could go down as well as up.

The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.

UnaVida Wealth Management Ltd. is directly authorised and regulated by the Financial Conduct Authority (440577).

The guidance in this website is primarily aimed at a UK audience and is subject to regulation by the Financial Conduct Authority (FCA).

The Financial Conduct Authority does not regulate tax planning, estate planning, or wills and any form of legal documentation.