IHT from 2027 and insurable interest now
Wildparaplanner
Member
Hi all,
We have a client who seems to be very keen on getting a whole of life policy in place to deal with the future IHT changes that are going to impact their pension assets quite significantly. Beneficiary is a sole child 100%.
They have an estate currently of c£900,000 (with full NRB and RNRB to carry forward as deceased spouse gave everything to them), but they have a DC pension worth £900k.
As it stands, if he was to die today, there would be no IHT to pay as full £1m of reliefs and pension outside of the estate. From April 2027, there would be IHT of £320,000 from my understanding.
Therefore, client wants to set up a WOL policy to cover this liability, but I am not sure we are able to right now as we are not sure where the insurable interest lies as at today? Client is in good health now, but theres the risk they might encounter issues between now and 2027.
Can anyone provide me with a better understanding of the insurable interest element, or if I am missing something in particular in my understanding?
Many thanks
Wild
Comments
You have unlimited insurable interest in your own life.
What you need to understand is the protection providers underwriting policy. Some will insure up to certain levels with no questions asked others will want financial underwriting.
I'm led to believe some insurers are not insuring liabilities for IHT based on the rule change until it is legislated for, but that's only an issue where there is a need to underwrite.
As an aside advisers are meant to advise not take orders - check whether investing the premiums might actually be better, or perhaps annuitising to provide income need will drastically reduce estate etc etc
Les is right, financial underwriting can limit the amount of cover a person can have e.g. most mainstream providers won't let you take out a policy for £10m unless there is demonstrable need, even though you have unlimited insurable interest.
Financial underwriting typically starts from around £1.5m of cover so for this amount I wouldn't worry.