Life insurance relief means you can claim for annual insurance premiums paid on life insurance policies bought on your life and the life of your wife or spouse.
In order to claim this relief for the Year of Assessment (YA) 2016, you must satisfy all these conditions:
Life Insurance relief cannot be claimed on premiums paid on an accident and health policy that provides for the payment of policy monies on the death of a person. Such a policy is not a life insurance policy.
Importantly, life insurance relief does not extend to life insurance policies purchased by a married woman for her husband. The relief also does not extend to life insurance policies purchased by parents for their children.
You are not eligible for Life Insurance Relief for YA 2016 if your total compulsory employee CPF contribution in 2015 is $5,000+
If your CPF contribution is less than $5,000, you may claim the lower of:
Mr Ong bought a life insurance policy for himself. The insured value of his life is $50,000. He paid annual premiums of $3,800 in 2015. His total compulsory employee CPF contribution is $1,600. Workings shown below.
| Life Insurance Value | $50,000 |
| Annual Premium in 2015 | $3,800 |
| Compulsory Employee CPF Contribution | $1,600 |
Firstly calculate the difference between $5,000 and his CPF.
| Maximum Ceiling on Employee CPF Contribution | $5,000 |
| Mr Ong’s Compulsory Employee CPF Contribution | $1,600 |
| Difference | $3,400 ($5,000 - $1,600) |
Secondly compare 7% of the insured value against the premium paid.
| Life Insurance Value | $50,000 |
| 7% of the Life Insurance Value | $3,500 (7% X $50,000) |
| Total Annual Premium in 2015 | $3,800 |
| The lower amount is | $3,500 |
Finally compare amounts in the above steps. Pick the lower amount.
| Difference between $5,000 and Total Compulsory Employee CPF Contribution | $3,400 |
| Step 2: Lower amount of Life Insurance Value and Total Annual Premium | $3,500 |
| The lower amount is | $3,400 |
Mr Ong is eligible for $3,400 Life Insurance Relief for YA 2016.