IPTM6130 - Sickness disability and unemployment insurance: anti-avoidance rules: investments presented as insurance

Mixed policies, that is policies comprising some sickness, disability and unemployment insurance with an investment element, are not uncommon and may exist for genuine commercial reasons.

There is, however, a possibility that an investment could be presented as a sickness disability and unemployment insurance policy in order to allow payments from the policy, which are in fact no more than a return of the premium plus a proportion of the investment ‘profit’, to qualify for the exemption.

To prevent this, there must at all times be a genuine risk that the insurer may make a loss on the policy, i.e. that a risk that they would have to pay out more in benefits than they had received in premium income. If such a risk does not exist, payments from the policy will not qualify for the exemption.