Do Your Credit Scores Have Anything To Do with Life Insurance?

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The fact that relevant life policy is a fairly new type of life insurance policy in the market is well known. It is primarily availed by employers of small businesses who want to establish a death in service benefit for their employees. Now there are certain requirements that you need to meet in order to qualify for this policy. We will come to know about them as we progress through the article. But it’s important to remember that your credit scores will play a crucial role in the entire process of securing a life insurance cover.

The credit scores generally reflect the financial management strategies adopted by the potential insurance seekers. As per the insurer’s logic if the potential insurance seeker is responsible with his money then he will also be responsible in other areas of his life and vice versa. Positive credit scores thus imply that you have been responsible with your money management as a result of which you have been able to repay your debts on time. Similarly negative scores would mean that you haven’t been able to chalk out a proper financial planning for yourself as a result of which you might have failed to repay your debts on time. Now this will lead insurers to believe that your general irresponsibility with money will be equally reflected in your personal life thereby triggering risks. However, you shouldn’t think that you won’t be able to obtain an insurance cover in case you have poor credit scores. The premiums will be a little high in this case but you will be able to obtain a policy nonetheless.

Now that you know about one of the crucial factors determining your chances of getting an affordable life insurance policy, let’s elaborate a bit on qualities that you would particularly need to fulfill for availing a relevant life policy.

You have to be the director or the owner of a small business, that doesn’t have the required number of employees to qualify for a group life scheme.

The employer takes out the policy with the employee being named as the insured.

Other features

  • Its a stand alone single life cover taken out on the life of an employee with his dependents being named as the beneficiary.

  • The benefits are paid as a tax free lump sum to the family of the insured after he passes away.

  • The policy stops providing protection as soon as the client completes his 75th birthday.

  • There benefits are payable through a trust and there are some insurance carriers that might need the trust to be set up before the policy is issued.

  • The insured can leave behind a letter of wishes stating clearly when he wants his nominees to receive or use the money. Though its not legally binding on the trust, they will definitely consider the letter while the benefits are paid out.

  • The employer is entitled to significant tax benefits as the premiums paid are considered to be part of the trading expenses and not benefits in kind.

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