Relevant Life Insurance Explained

By | June 6, 2023

Relevant life insurance is a death in service life insurance policy. It is paid for by the business on behalf of its employees. Because the premiums are paid for by the business the policy can be tax efficient. A business director who already has a life insurance policy or is thinking of taking one out you should consider switching to a relevant life policy. It will offers a level of life insurance cover but as it is paid for by the company it avoids being paid from your personal taxed earnings.

Relevant life insurance is aimed at 2 key groups. High earning employees who have substantial pension funds who don’t want their death in service benefits to form part of their lifetime allowance. Or for small business without enough employees to set up a group in service scheme this tends to be businesses with less than five employees. Relevant life is good for these businesses because it can be taken out on a single life, for the business director and other employees.

Your business could benefit substantially from providing a company life insurance policy for its staff because providing a benefit improves staff retention, employees feel a level of care and value boasting moral. Having benefits for staff also makes smaller companies appear financial secure when they are recruiting.

Relevant life is tax efficient because the business can set the cost of the policy against its profits, saving the 20% corporation tax. Also as it is paid for by the business so income tax and national insurance are not payable on the premium, it also doesn’t count as part of a pension and can be deducted as a trading expense. Another benefit from having relevant life cover is that the insurance policy must be written into trust. This basically means instead of the insurance payment becoming part of the deceased’s legal estate when they die, it is paid directly to the beneficiaries. This is good for a number of reasons mainly that it can sidestep inheritance tax.

Because the policies are tax efficient there is a specific criteria which needs to be met in order to qualify. It must be for the company director or employees within a company of less than five, and the policy must be written into trust so the payment goes directly to a beneficiary this can be an individual or a charity. The policy will also only insure and pay out up to the age of 75, and it will solely pay out on death as critical illness cannot be added. If you are eligible for a relevant life insurance it is definitely worth considering.