Relevant Life Insurance

What is Relevant Life Insurance?

In simple terms, Relevant Life Insurance is a cost-effective way of taking out life insurance for you or your employees.

 

It’s designed to pay out a lump sum on death or diagnosis of a terminal illness. Straightforward and cost-effective, Relevant Life Insurance can also be tax-efficient for both the business and the employee.

The cover is paid for as an expense through the business.

Who can get Relevant Life Insurance?

The great news is that any employee of a UK business including Self-Employed Limited Company Directors can get Relevant Life Insurance!

What is does and how it works

  • It provides Life Cover for an employee/ Director whilst they work for the company.

  • The Company pays the premiums on behalf of the employee/Director.

  • It provides a more cost-effective and tax-efficient way of arranging Life cover.

  • The company takes out a Relevant Life Plan on behalf of the employee/Director

  • The Relevant Life Plan is placed in Trust by the employee/Director

  • If the employee/Director dies during the term, a claim is made by the Trustee(s)

  • The Relevant Life Plan pays out the to the Trustee(s).

Image by Dylan Gillis

Why it’s so tax-efficient

✓ It’s usually cheaper than arranging cover privately.


✓ Premiums are normally classed as a business expense and

are therefore tax deductible.

✓ Placing it in Trust may avoid any potential Inheritance Tax Liability on the benefit payable.

 

✓ The premiums are paid by the business and not from the employee/Directors’ net income (from which Income Tax and NI contributions are taken first).

✓ Under current rules, the benefit from a Relevant Life Plan doesn’t count towards someone’s lifetime pension allowance (unlike a Group Death in Service Scheme).

So, how much can I save?

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This example is fictitious and provided for illustrative purposes only. It assumes that the policyholder’s Relevant Life Plan gets full tax relief and qualifies as an allowable business expense. Actual premiums will depend on individual circumstances.
As with all insurance policies, exclusions and limitations may apply.