Sales of ‘pure protection’ life insurance rose 25% to £431m in the year to June 2024, up from £345m the previous year, shows new data from Bowmore Financial Planning.
Bowmore says that the use of life insurance and specific insurance to help mitigate Inheritance tax is likely to become more popular following increases in IHT announced at the last Budget. Life insurance payouts are free from income and capital gains tax, and if the policy is held in specific types of trust, they can also be exempt from inheritance tax.
Pure protection products offer financial cover for specific events – mainly death – without investment or savings features. This includes life insurance, which provides a lump sum to beneficiaries when the policyholder dies.
The last budget saw Chancellor Rachel Reeves increasing IHT on business assets, agricultural property, AIM shares and proposed legislation will mean that previously excluded pension assets, will be liable to IHT from 2027. As a result, specific protection policies designed to protect against IHT is expected to see a further rise in demand as a tool for wealth protection.
Says Roy Quick, Financial Planner and protection specialist at Bowmore Financial Planning: “people are worried about what last year’s Budget means for their dependants and beneficiaries of their estates. Protection (insurance) is emerging as a way to ensure that more of your wealth reaches the next generation.”
“Many don’t appreciate that inheritance tax is a voluntary tax and with effective planning you can mitigate your family’s inheritance tax liability, the most recent budget has meant that more of your assets are set to become subject to the 40% tax charge, most notably pension and with less options now available to IHT mitigation not available to us, things like protection policies are likely to be more widely used”
Sales of pure protection life insurance jump 25% in a year to £431m
*Total premium amount for pure protection contract sales: FCA
