IPTM7055 | Exceptions: mortgage protection policies: ITTOIA05/S478

Insurance policies designed solely to pay off a repayment mortgage in the event of the death of an individual borrower are excluded from the chargeable event legislation. This is so long as the mortgage is of the individual’s home or of any premises occupied by the individual for the purposes of his or her own business. These are reducing-term assurance policies where the death benefit reduces in line with the principal of the mortgage loan. Such policies have no investment element and should acquire no surrender value so are unlikely to give rise to gains anyway.

This exclusion only applies to policies that pay out on one death only, including payments made to a spouse or partner under the terms of a jointly held policy. It does not extend to group life mortgage protection policies, which remain within the scope of the chargeable event legislation unless taken out by the exceptions for certain group life policies – see IPTM7025 to IPTM7050.