AIG upgrades Term Assurance to support IHT planning


18th September 2018

AIG Life has enhanced its Term Assurance to help individuals cover their inheritance tax (IHT) liabilities.

The new Joint Life Second Death (JLSD) option is a cost-effective alternative to Whole of Life insurance for couples who plan to gift assets away and erode their IHT liability by a certain age.

There is also an option which allows customers to carve out a ‘gift inter vivos’ plan from the existing sum assured, without the need for further health or lifestyle questions. This can pay the reducing IHT liability on any gifts made over the term of the insurance.

“Using life cover for inheritance tax planning is not always as simple as taking out a Whole of Life policy and then forgetting about it. Financial advisers proactively help clients reduce their liability over their lifetimes and the developments we are announcing today dovetail with that approach”, said Andy Roberts, Technical Sales Manager at AIG Life.

At the same time, AIG has reduced the minimum term to two years to meet the needs of individuals investing in Business Relief-qualifying schemes. These are free of IHT after being held for two years but fully liable in the meantime. The two-year term is also available on a JLSD basis for joint applications.

“Business-Relief qualifying schemes are an increasingly popular way to reduce an IHT liability, but it is important to remember life cover is still required, even if it is only for a two-year period”, added Roberts.

These features have been developed by AIG to make IHT cover accessible and affordable to as many people as possible, according to Anna Graham, Chief Pricing Actuary (Intermediary) at AIG Life.

“People who do inheritance tax planning have a right to affordable life insurance because they are doing something positive to benefit their families and loved ones,” said Graham. “We have worked hard to keep the customer in mind when pricing these new Term Assurance options.”

Assets are subject to inheritance tax at a reducing rate from 40% to 0% over seven years when gifted to an individual.


Number of years since gift given and death occurs

Taper Relief

Rate of IHT

0-3 0% 40%
3-4 20% 32%
4-5 40% 24%
5-6 60% 16%
6-7 80% 8%
7+ 100% 0%

The gift inter vivos structure allows a policyholder to buy additional Term Assurance policies lasting 3, 4, 5, 6 and 7 years which are each worth 20% of the inheritance tax liability – the amount someone might have to pay in inheritance tax if the policyholder died that year. If the insured person dies within the seven years, the insurance paid will cover the IHT liability provided it is written in trust.

Shares in qualifying businesses – such as private companies not listed on a stock exchange or firms listed on the Alternative Investment Market (AIM) – attract 100% Business Relief providing they have been held for at least two years at the time of death. If the shareholder dies within those two years and the value of their estate is more than the IHT nil-rate band, the investment is subject to 40% tax.