For people new to the contracting game, there are many things you need to take care of. Setting up your new company, talking to a contractor accountant, opening a new bank account. All of which are extremely important but something else you may want to consider is your life insurance policy.
Andy McBride, a financial expert, has firmly advised seeking advice. “A financial adviser will start by understanding what the contractor’s needs are, what needs to be protected and what that figure should look like. Then the adviser will take a view as to the best options: new cover, extend existing cover and so on.” This angle particularly applies to those taking on contract work after leaving traditional employment. There are certain aspects of your policy that may need amending. Contractors no longer have the safety net of sick pay or even payment from your company if you pass away. This is where insurance comes in and the different options aren’t always plain to see.
As a contractor, for example in the IT sector, you are expected to earn 30% more money. As a result of that you will live a more expensive lifestyle, perhaps increase the size of your home. Again, as mentioned previously, if you took out your policy before switching jobs, you may not be getting the best bang for your buck.
Your life insurance policy is designed to protect your family and if your existing policy doesn’t provide sufficient cover then a change is needed. There are a few angles that can be taken, a completely new policy or a top up of your old policy. Both of which can be equally as effective. It can often be more cost effective for you to take out an entirely new policy, as mortality rates have increased over the years. McBride also has suggested “It may also be possible to tax efficiently supplement personal policies with relevant life cover through the contractor’s limited company”.
Relevant Life Policies are a tax free benefit, this means that your limited company can pay for them. This in turn will reduce your Corporation Tax liability, plus you will not pay any personal tax on being provided with this benefit. If you do not have a relevant life policy in place there’s no better time than now to set this up.
Contact the Gorilla Accounting team today on 0300 024 0406 and they can put you straight in touch with the experts to get you covered.