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5 Reasons You Should Take Out Relevant Life Insurance Key man Insurance UK


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5 Reasons You Should Take Out Relevant Life Insurance Key man Insurance UK
5 Reasons You Should Take Out Relevant Life Insurance Key man Insurance UK

5 Reasons You Should Take Out Relevant Life Insurance Key man Insurance UKThis article outlines five advantages of relevant life cover for both individuals insured under the plan and for the employer. We’ll highlight why this tax-efficient insurance policy is beneficial for UK companies looking to provide financial protection for employees and owners.


1. Life Insurance with Great Tax Advantages

A major appeal of relevant life plans in the UK is that premiums are considered an allowable business expense and are deducted from company profits for tax purposes. This allows companies to provide life insurance as a benefit to individuals in a highly tax-efficient manner.

Furthermore, lump sum payouts under relevant life policies are not subject to income or corporation taxes. The death benefits are paid tax-free to beneficiaries via a trust, ensuring employees receive a quick payout at full value. These tax advantages can provide significant savings against paying for your own life insurance through your already taxed income. Savings can be up to 40% or more depending on the tax bracket of the employee. Relevant life insurance isn’t treated as a P11D benefit in kind, so there is no need to pay National Insurance contributions on premiums.


2. Rewards and Retains Top Talent

Implementing relevant life insurance shows employees that management cares about their financial well-being and safety. It demonstrates investment in personnel and boosts loyalty.

For businesses looking to retain and motivate top talent who have lots of career options, company-paid life insurance can be an attractive benefit that gives them financial security. It boosts morale and makes employees feel valued.

So while relevant life plans certainly help companies manage transitions if they lose a top employee, they also serve as a tool to proactively retain personnel by showing commitment to their welfare. The coverage says employees matter.


3. The Use Of A Discretionary Trust

A key requirement of relevant life policies in the UK is placing the cover under a discretionary trust. Rather than naming the business as beneficiary, trustees distribute proceeds to the beneficiaries named within the trust. Trustees administer the claim and pay policy proceeds to any named beneficiaries tax-free.

Trusts also bypass probate delays, protect against estate taxes, offer creditor protection, allow structured distribution of funds, and prevent beneficiaries from directly controlling proceeds.

So implementing relevant life insurance through a discretionary trust provides control over policy payouts while optimising tax efficiency for both companies and insured employees.


4. Shows Commitment to Employees

Implementing relevant life insurance demonstrates an employer’s commitment to employees and improving financial well-being. It shows investment in staff and their families which in turn helps massively with employee retention efforts.

For top talents weighing career options, company-paid life insurance amounts can factor favourably during compensation considerations. It’s an attractive benefit which will be greatly appreciated by most employees especially those with families. 


5. Premiums Are Tax Deductible Expenses

Unlike most other forms of individual life insurance, relevant life policy premiums paid by the company are considered a deductible business expense.

This allows sponsors to deduct the cost of premiums from taxable corporate profits, providing inherent tax relief versus non-deductible expenses.

In most scenarios, relevant life plans result in companies getting full tax deductions on premiums paid to insure employees. This type of tax incentive makes the coverage more affordable and valuable. For a more in-depth look at the tax implications please check out our blog “Relevant Life Insurance HMRC Tax Treatment


It’s important to note that relevant life insurance is subject to certain eligibility criteria and may not be suitable for all companies or employees. It’s crucial to seek professional advice from a qualified insurance professional or financial advisor to determine if relevant life insurance is appropriate for your company’s needs and comply with applicable laws and regulations.


Disclaimer: Information in regard to tax treatment and basis of reliefs are dependent on current legislation. Individual circumstances are not guaranteed and may be subject to change. This is to be used as a guide only and we always recommend speaking to a qualified tax advisor. The Financial Conduct Authority do not regulate trusts.

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