Further Uses of Life Assurance - Childrens policy

This policy, known by a variety of names, such as a child's deferred assurance, junior policy, threshold policy, or child's assurance, is a very popular gift from parents. The parent takes out an endowment policy on his or her own life arranged to mature when the child becomes, say, 23 years old. At this stage, the child has a number of options.

He or she can either take the sum assured plus bonuses as a cash sum, or continue to pay premiums at the previous rate but convert the policy to one on his or her life. If the child chooses the latter course, then the new policy may be either a whole-life or an endowment assurance with or without profits. Furthermore, the option may be selected whatever the state of health or occupation of the child at 23. If the parent dies before the child takes over the policy, premiums cease until after one of the options has been selected by the child.

With the child's policy just described, the premium is reduced by income-tax relief on the premium paid, provided the premiums under the original policy are payable for at least ten years. You must therefore take the policy out before your child is i i years old if you want the options to be available when your child is 23.

There is on the market another kind of child's policy where, instead of insuring the parent's life to start with, only the child's life is covered. The disadvantages of this method are that the premium is usually still payable even if the parent dies, and no income tax relief is available on the premiums.

Example

Example 9. A parent, age 69, takes out a child's assurance for his child, now i year old. He takes out a policy, on his own life, providing a number of options on the child's 21st birthday.

i. Parent's policy

Cash benefits on the death of the parent:

Premiums cease, and an income of Lizo a year is paid until the

Further Uses of Life Assurance I I3

child is £2, when a cash sum of £900, together with bonuses, estimated' at £490, becomes available, equalling k79o.

Gross premium = £62.00

Income tax relief at 9% = 44.8o

Net annual premium (6z.00 - &.8o) =- £47-2o Therefore total net premium over zo years = 4944'00 Estimated profit when child 23 = 206'00


Childrens policy

Payroll Giving
It’s all very easy to organise.
Just ask the Personnel or the Payroll Department at your company and, if they already have a scheme, they will give you the relevant forms.  HM Revenue & Customs’ website has a list of Payroll Giving agencies and explains payroll giving in more detail.

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read on: Further Uses of Life Assurance - School fees

This policy, known by a variety of names, such as a child's deferred assurance, junior policy, threshold policy, or child's assurance, is a very popular gift from parents. The parent takes out an endowment policy on his or her own life arranged to mature when the child becomes, say, 23 years old. At this stage, the child has a number of options.

He or she can either take the sum assured plus bonuses as a cash sum, or continue to pay premiums at the previous rate but convert the policy to one on his or her life. If the child chooses the latter course, then the new policy may be either... see: Further Uses of Life Assurance - School fees