Taxation on Life Insurance

The taxation of life insurance could affect you depending on what type of insurance cover you purchase. The four main insurance types are:

• Term Insurance
• Whole of Life Insurance
• Endowment Insurance
• Joint/Partnership Insurance

Non-investment life insurance policies are not usually taxed; however policies such as endowment and whole of life are subject to tax, depending on the qualifying status of that policy. The qualifying rules regarding whether a life insurance policy is qualifying or not are complex – as a general rule qualifying policies include term assurance policies, whole of life policies and endowment policies which have a term of 10 years or more.

You may not be able to avoid the taxation of life insurance, but there are certain questions that you should consider when choosing:

• What are the charges and do they seem reasonable?
• How suitable is the life insurance for your own personal needs?
• How flexible is the insurance policy? Can I cancel or switch it easily?

When taking out any insurance always read the small print and the terms and conditions.