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HMRC internal manual

Insurance Premium Tax

The Insurance Industry: Types of insurance: Long-term insurance

The main classes of long-term insurance are:

  1. Life insurance, which is usually one of two broad types:
  • that sold as investment (on the basis that if the insured dies the policy pays a claim, or if the insured has not died by the time the policy matures it pays a sum based on the premiums received plus an investment return) – this is known as endowment business; and
  • whole life or term insurance (which only pays out on death): term insurance is of limited duration, and only pays out if death takes places during the term of the policy;
  1. Pensions insured business;
  2. Permanent health insurance (PHI) or income protection insurance that provides a replacement income when someone is unable to work due to sickness or disability. (PHI should not be confused with ‘health insurance’ that covers medical expenses, for the cost of hospital treatment or ‘accident’ insurance, which compensates someone who has had an accident. See IPT04280 for the liability of accident or health insurance premiums).