Life Insurance for High Earners | Money Saving Advisors
Consider larger coverage and estate planning if you have a high income. Tailored life insurance tips for high earners.
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Protecting the people and lifestyle you love
Life insurance helps protect your loved ones financially if you pass away. But for high earners, it's about more than just funeral costs. It means safeguarding a lifestyle, managing taxes, and making sure your wealth isn't undone by the unexpected. Paying off debts like a large mortgage and covering school fees may also be major factors.
Meeting high-value commitments
When your lifestyle includes large financial responsibilities, your cover needs to scale accordingly.
- Mortgages and assets: If you own a high-value home or multiple properties, life insurance can cover outstanding loans so your family doesn't have to sell under pressure.
- Education and lifestyle: Private school or university fees, club memberships, and other premium lifestyle choices shouldn't disappear overnight. Tailored cover helps ensure continuity.
- Income replacement: If your family depends on your high income, life insurance replaces it so their quality of life stays intact.
Planning for the tax benefits
Life insurance isn't just about the payout - it's how that money is taxed (or not) that counts.
- Inheritance tax (IHT): In the UK, anything over the £325,000 threshold (or £500,000 if left to direct descends) is taxed at 40%. Life insurance placed in a trust can help your heirs avoid a big tax hit.
- Business protection: If you're a company director or business owner, policies like relevant life insurance offer tax-efficient benefits like reducing your company's corporation tax bill.
- Estate planning: Life cover can be a tool in broader estate planning, ensuring your wealth is passed on with minimal loss to taxes or delays.
Summing up
Life insurance isn't just about covering the basics - it's about making sure your family can maintain the lifestyle you've worked hard to create. From major income replacement to funding your children's education at the highest level - providers understand their high-net-worth clients need more than a traditional life insurance package.
Ready to explore life insurance for high earners?
Frequently Asked Questions
Is life insurance tax-free in the UK?
The payout from a life insurance policy is generally free from income tax. But your heirs could pay inheritance tax (IHT) if it forms part of your estate. For high earners, this is a major concern due to the value of assets involved. Placing your policy in a trust can help ensure your beneficiaries receive the full amount quickly, tax-free, and without the delays that come with probate.
Should I add terminal or critical illness cover as a high earner?
Adding critical or terminal illness cover can provide valuable financial protection beyond traditional life insurance. Critical illness offers a lump-sum payout if you're diagnosed with a serious condition, and helps pay for treatment or replace lost income during recovery. Terminal illness cover may allow an early payout of the death benefit if you're diagnosed with a terminal condition and given a limited time to live.
Does my life insurance policy have a cash value?
Cash value is a feature of permanent life insurance plans, such as universal life or whole life insurance, and it builds up over time as a tax-deferred savings component. This value can be borrowed against or withdrawn while you're alive. Term life insurance, on the other hand, doesn't include a cash value - it provides coverage for a set period and only pays out if you die during that term.
How much cover should a high earner get?
There's no universal answer, but advisors often recommend cover worth 10 to 15 times your annual income. On top of that, you should factor in any large debts, future school or university fees, and lifestyle costs your family may face. The aim is to replace your income and protect your assets so that your family can maintain their quality of life without you, and without financial strain.
Can I use life insurance for business protection?
If you own a business or are a company director, a relevant life insurance policy is a smart option. It's written in trust and paid by the business, which can claim the premiums as a tax-deductible business expense. This means no benefit-in-kind tax for you, and potential savings for the company. It's a popular choice for high earners who want to protect their families and reduce their business tax liability.
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