What is life insurance exactly?

Life insurance is a contract which, after payment of a premium, insures subscribers (or anyone who depends on him/her) against all risks related to disability or death.

There are different types of life insurance contracts on the market, but here are some of the main ones:

• Annual renewable term life insurance:

This type of contract is renewed annually and provides for a guaranteed benefit in the event of the insured person’s death or disability. The premium is recalculated and increases each year upon renewal based on the insured person’s age.

• Decreasing term (or level premium) life insurance:

This is the type of contract used with property mortgages like real estate loans, for example. With this type of contract, the premium is at a fixed rate for a limited period of time. This type of insurance is largely used in cases where you wish to guarantee the payment of a mortgage.

How does Portugal tax life insurance?

As of 1 January 2004, Portugal officially ended inheritance tax and taxes on gift donations. Only stamp duty must be paid on property in Portugal: 10% + 0.8% for fixed property transfers.
However, life insurance premiums and commissions paid as part of life insurance contracts are not subject to stamp duty in Portugal. In any case, note that any premiums paid under the contract are subject to taxes: 0.048% to the Insurance Surveillance Authority and 2.5% to the National Medical Emergency Service (“INEM”).

In the event of a buyback, only the portion of the products (interest, capital gains...) included in the buyback are taxed at a 28% flat rate in Portugal. This rate can be reduced to 22.4% under certain conditions, particularly if the contract was signed more than 5 years before, or to 11.2% if the contract was signed more than 8 years before.

Why is life insurance so important?

Life insurance is probably the planning tool that should be prioritised by everyone whether a head of household or entrepreneur. In the event of a disability or death, life insurance can guarantee your children’s education, ensure a certain living standard is maintained by your loved ones and, if you are in a key position at your company, provide for the continuation of your business project.

To find out more about life insurance and get a quote, contact INOV Expat right away. We’ll answer all your questions for free and suggest some solutions that are adapted to your needs as quickly as possible.