MIP

Question 1

practice 3 (b)

Outline the conditions which must be met for Emiliano’s MIP to be classed as a qualifying policy and state the tax treatment should he encash the policy as planned. 6 marks

Answer 1

(b) * The policy term must be 10 years or more.
* Premiums must be paid yearly or more frequently.
* The premiums paid in any 12-month period must not exceed twice the premiums in any
other period;
* or 1/8 of the total premiums paid for a period of 10 years.
* The sum assured must be not less than 75% of the premiums payable during the policy
term.
* The gain realised on encashment would be tax-free.