Can you increase or decrease your relevant life cover?
Yes, in many cases you can.
Your level of relevant life cover is not necessarily fixed for the entire policy term.
If your circumstances change, you may be able to increase or reduce the amount of cover, although the options available will depend on your insurer and the type of policy you have.
Some changes can be made without taking out a completely new policy. Others may require a new application and further underwriting.
If you’re new to relevant life insurance, start with our guide to what relevant life insurance is.
Many relevant life policies can be changed after they have been taken out. Depending on the insurer and the policy terms, you may be able to increase or decrease your level of cover. Larger increases often require further underwriting and may result in higher premiums.
Why might you increase your cover?
Your insurance needs rarely stay the same throughout your career.
A director who needed £300,000 of cover five years ago may require considerably more today.
You might consider increasing your cover if:
- your salary has increased
- your dividends have grown significantly
- your mortgage has increased
- your family circumstances have changed
- you simply want a higher level of financial protection
Our guide to how much relevant life insurance you need explains how cover is often calculated.
Can you reduce your cover?
Often, yes.
Some directors decide they no longer need the same level of protection.
For example, they may have repaid most of their mortgage, built up savings or reached a stage where fewer financial commitments remain.
Reducing the amount of cover may also reduce the monthly premium, although this depends on the insurer and the changes being made.
Will you need to complete another medical?
It depends.
If you increase your cover, the insurer may ask further medical questions or conduct additional underwriting.
If you are reducing your cover, further medical information is often unnecessary.
Every insurer has its own underwriting rules.
You can read more in our guide to how the underwriting process works.
Can you simply amend the existing policy?
Some insurers allow existing policies to be amended rather than replaced. Whether this is possible depends on the insurer, the type of policy and the changes being requested.
Others may recommend replacing the policy with a new one instead.
The best approach will depend on your age, health, the existing policy terms and the amount of cover required.
Will your premiums change?
Usually, yes. Increasing your level of cover will normally increase your premiums, while reducing your cover may lower them.
However, the final premium will also depend on factors such as your age, health and the insurer’s underwriting assessment.
Our guide to how much relevant life insurance costs explains the main factors affecting premiums.
Does changing the cover affect the tax treatment?
Not by itself.
Provided the policy continues to satisfy the conditions for a qualifying relevant life policy, changing the level of cover does not normally affect the underlying tax treatment.
The policy must still comply with HMRC’s rules for relevant life insurance.
You can read more in:
Should you review your cover regularly?
Many directors review their relevant life insurance whenever there is a significant change in their business or personal circumstances.
Examples include:
- an increase in earnings
- buying a new home
- starting a family
- taking on additional financial commitments
- approaching retirement
Reviewing your cover every few years can help ensure it still reflects your current circumstances.
What if your company changes?
If you move to another company or close your existing business, changing the amount of cover may not be the only issue.
The policy itself may need to be transferred or replaced, depending on the circumstances.
You can read more in our guide to what happens if you change companies.
Frequently asked questions
Can I increase my relevant life insurance?
Often, yes. Many insurers allow directors to increase their cover, although additional underwriting may be required.
Can I reduce my relevant life insurance?
Usually, yes. Some insurers allow the amount of cover to be reduced if your circumstances change.
Will I need another medical?
Possibly. Increasing your cover often involves further underwriting, while reducing cover may not.
Does changing my cover affect the tax advantages?
Not normally. Provided the policy continues to satisfy HMRC’s qualifying conditions, changing the level of cover does not usually alter the underlying tax treatment.