11 Purdeys Way, Rochford, England, SS4 1ND
11 Purdeys Way, Rochford, England, SS4 1ND
While Relevant Life Insurance and Shareholder Protection both provide financial security, they serve different purposes. Relevant Life Insurance is used to protect the employee’s beneficiaries, whereas Shareholder Protection is used to protect existing shareholders and helps maintain company stability.
Let’s take a closer look at Relevant Life vs Shareholder Protection to help you find the best protection for your staff and business. We’ll look at the benefits of both types of insurance, along with what you can expect from both Shareholder Protection and Relevant Life cover.
Relevant Life Insurance is a tax-efficient life insurance policy taken out by a business to provide life cover for an employee or director. If the insured employee unexpectedly passes away, a lump sum is paid to their beneficiaries, which can be used to cover expenses such as mortgage or rent, utility bills and childcare.
Some of the features of Relevant Life Insurance include:
Shareholder Protection Insurance ensures that the remaining shareholders have the financial means to purchase the deceased’s shares if a shareholder dies. This prevents ownership from passing to other parties and helps the business maintain stability.
One of the advantages of Relevant Life Cover is its tax benefits. Premiums are usually considered a business expense, which reduces Corporation Tax for the company. Employees also don’t pay Income Tax or National Insurance on the insurance premiums, nor Inheritance Tax if the payouts are placed in a discretionary trust.
Relevant Life Insurance is designed for small and medium businesses that may not qualify for large group life insurance schemes. The insurance allows directors and key employees to have life insurance that is paid for by the company and protects their beneficiaries in the event of their death.
The cover for Relevant Life Insurance is typically based on the insured director or employee’s salary and therefore can offer significant levels of cover. Some policies also include additional benefits such as Business Care and Medical Services.
The main benefit of Shareholder Protection is that it prevents shares from passing to an unintended party, such as family members of the deceased. This helps the business maintain stability by keeping control with the remaining shareholders.
Shareholder Protection provides funds to allow the company to buy the deceased’s shares, which avoids financial strain on the business. Not only does this allow the company to keep shares with selected shareholders, but it also ensures the deceased shareholder’s beneficiaries receive fair compensation.
When you’re comparing Key Person Insurance or Relevant Life cover, it’s important to remember that they are designed to help different people and both have various benefits.
Key Person Insurance protects the business financially if a key employee or director dies or becomes critically ill. Conversely, Relevant Life Cover provides tax-efficient life cover for an employee or director and benefits their family. The company benefits directly from Key Person Insurance and receives the payout to cover losses from the sudden absence of the employee’s salary, while the employee’s family receives the payout with Relevant Life Cover.
It’s a good idea to consider Key Person Insurance if your company relies on key employees for revenue, strategy, or financial obligations. Meanwhile, Relevant Life Insurance is ideal for business owners looking for a tax-efficient way to provide life cover for employees or directors.
Here at My Key Man Insurance, we can help you find and compare the best insurance to protect your company and staff. As an insurance broker, we compare various insurance providers and deals to provide tailored coverage for your company, directors and employees. Contact us for help and advice finding the best Shareholder Protection and Relevant Life Cover for your company. We can also help you find other types of business insurance, including Business Loan Protection and Director Life Insurance.
No, Relevant Life policies can’t be used for Shareholder Protection. UK law requires Relevant Life policies to meet certain criteria; Relevant Life Insurance must be used to benefit the employee’s family, not the company or shareholders.
One of the main differences between Relevant Life vs Shareholder Protection is who benefits from the payout. Relevant Life Insurance pays a lump sum to the insured director or employee’s beneficiaries, while Shareholder Protection helps the company secure the shares of a deceased or ill shareholder.
Relevant Life Insurance may be transferred to the individual if they leave the company, which allows them to continue the coverage personally. Meanwhile, Shareholder Protection usually ends for a shareholder if they leave, as their shareholding in the business changes. The company may need to set up a new agreement for new shareholders.
Relevant Life Insurance generally doesn’t include critical illness cover and is primarily for death benefits. Some insurance lenders offer Critical Illness cover as an add-on. However, Shareholder Protection can include critical illness cover, and ensures that if a shareholder is diagnosed with a serious illness, there are funds available for them to sell their shares.
