Disclaimer:
This information is for general purposes only and does not replace advice from a qualified tax professional.
Cross insurance allows two parties, such as couples or business partners, to insure each other by naming the other as the policyholder. This arrangement changes the beneficiary’s status to policyholder, making the sum insured a tax-free contractual benefit rather than inheritance. Setting up cross insurance with Feather requires submitting a request and approval from both parties.
What is cross life insurance?
Cross life insurance is a type of life insurance that allows two people, such as couples or business partners, to insure each other. Instead of one person simply naming the other as a beneficiary, cross insurance changes the designation so that each party is the policyholder of the other's life insurance policy while remaining the insured individual.
How does cross life insurance help avoid inheritance tax?
In some European countries, like Germany, cross insurance changes the status of the beneficiary to that of the policyholder rather than a simple beneficiary. This means the payout is considered a tax-free contractual benefit rather than inheritance, so it is not subject to inheritance tax.
Who benefits most from cross life insurance?
Cross insurance is especially beneficial for unmarried couples. In Germany, non-married partners have a tax-free inheritance allowance of only €20,000, while married couples benefit from €500,000 (as of July 2023). Anything above the tax-free amount must be taxed. Cross insurance can also help married couples who have already used their inheritance tax allowance on other assets, such as property.
How does cross life insurance differ from standard partner life insurance?
Standard partner life insurance involves insuring your own life and naming your partner as the beneficiary. In this case, the beneficiary receives the payout as inheritance, which is subject to inheritance tax. Cross life insurance changes the beneficiary’s status to policyholder, removing the inheritance tax on the benefit.
How can I set up cross life insurance with Feather?
To set up cross insurance with Feather term life insurance, you need to submit a request form with basic information about both parties and their photo IDs. Both parties must then provide signatures to confirm the change. After setting up, undoing this change requires explicit approval from the new policyholder.
Feel free to reach out to our support team should you have additional questions.