Life cover

As a Contractor you miss out on the life cover offered by a large employer so it is vital that you put a plan into place to secure your families future should you die.

ContractorFinancials specialise in finding the right insurance to suit your individual needs as a Contractor and provide this essential cover at an affordable price. There are two main types of life insurance:

Term Cover

Term cover offers an inexpensive protection policy that lasts for a given period and will end when the agreed term is finished.

Whole of life Cover

If you want to cover yourself for death at any age then a Whole of Life policy could be the answer. Despite being slightly more expensive than a Term cover policy, it is often popular with contractors because of the long-term cover that it provides.

Contractor Financials offers a variety of life cover policies which can be used in various ways:

Level term assurance plan

These policies pay a set lump sum to your dependents that they can then invest to gain an income. The value of this lump sum can be affected by external influences such as interest rates or inflation that reduce the amount of income.

·         Covers you for the period in your life i.e. for when you have dependent children (e.g. until they are 18 or 21)

·         Saves your family from being left with your debts by protecting loans or a mortgage.

The cover should be inflation proofed so that it holds its value for the life of your policy. This means that the sum paid out by the insurer upon death will be worth the same amount at that point as it is now, as it will rise with the level of inflation.

Decreasing term assurance plan

Pays a steadily reducing lump sum depending on when death occurs through the term of the plan. Can be used to provide funds to help settle a repayment mortgage if you die.

Family income benefit plan.

This policy will provide a set income over a pre-determined term so that your family will have help with the bills etc.

Your total payout will differ according to how far into your policy you are i.e. if you claim early on then the overall payment will be larger than if you claim at the end of the policy because the number of annual payments made would be less. If you are looking for a set lump sum regardless of when a claim is made then a level term may be better suited to your needs.

Relevant Life Cover

One Man Ltd company Contractors can fund life insurance through the business with no income tax or benefit in kind considerations thanks to a change in legislation that means smaller companies now have the chance to tax efficiently provide death in service benefits for their employees. Contractors using a One Man Ltd company can transfer the cost of life insurance to your business rather than fund the cost personally from your post-tax income. It may also be possible to have this payment treated as a business expense.

Unlike the traditional ‘Keyman’ insurance for small business owners, where any payout on death invariably belonged to the company and so the business or your dependents could ultimately be taxed upon receipt of the funds. With Relevant life cover the benefits wont be liable for inheritance tax in most cases, as long as they are payable through a simple discretionary trust.

The new product essentially works the same as the old pension term assurance but does not affect your lifetime or annual pension allowances. So those Freelancers with a large pension pot are still able to benefit from the lucrative tax relief on pensions contributions whilst your life cover contributions now offer you a further opportunity to save tax. 

The good news is that even if you decide to hang up your Contracting hat and return to permanent employment, you can still benefit from the tax savings by simply transferring your policy to your new employer. Your cover is kept in trust and this not only keeps the money safe from any liabilities that the company has but also makes the plan easier to transfer.

It is possible for ContractorFinancials clients to protect life cover payments if they are unable to work due to illness or injury. After six months the insurer will maintain the payments so that your family or mortgage remains protected, this is called a ‘waiver of premium’.

To find out more call 0845 062 8888 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Financial advice is given by ContractorFinancials, which is a trading name of Contractor Financials Ltd and is regulated and authorised by the Financial Conduct Authority.


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