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HMRC internal manual

Insurance Policyholder Taxation Manual

From
HM Revenue & Customs
Updated
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Combined policies: family income cover and mortgage protection cover

There are certain combined policies that combine whole of life cover,term cover or an endowment with

  • family income cover, or
  • mortgage protection cover.

Family income cover

Family income cover provides a series of capital sums on death, if the deathoccurs during a specified period The sums payable are known as ‘family incomebenefit’.

Mortgage protection cover

Mortgage protection cover provides decreasing insurance, where a capital sumis payable on death only within a specified period, the amount of which decreases overthat period. The amount of the outstanding mortgage loan reduces over time and the purposeof mortgage protection cover is to provide a benefit on death that meets the loanoutstanding at date of death.

Can a combined policy that includes family income or mortgage protection coverqualify?

A combined policy must first be tested under the general qualifying policy rules. If itpasses then it is qualifying. If it fails then it may still be qualifying under the rulesin ICTA88/SCH15/PARA9.

Strictly, the rules in paragraph 9 only apply to

  • whole of life policies combined with family income benefit, and
  • term or endowment policies combined with additional decreasing insurance.

In practice, the rules may be treated as applying to any combination of whole of life,endowment or term policies with family income benefit or additional decreasing insurance.

IPTM8085 describes the tests that must be applied to a combinedpolicy under paragraph 9.

Further reference and feedback IPTM1013