11 Purdeys Way, Rochford, England, SS4 1ND
11 Purdeys Way, Rochford, England, SS4 1ND
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If you’re on PAYE (even with low salary + dividends), a Relevant Life Plan can often be more tax-efficient than paying for personal life cover from post-tax income. We’ll check eligibility, set up the discretionary trust correctly, and document the business rationale for underwriting.
Relevant Life Insurance is an excellent option if you wish to safeguard your directors & staff while also gaining significant tax advantages for your company.
In today’s competitive landscape, providing relevant life cover is more than just a benefit, it’s a strategic financial decision that can save you money. A Relevant Life Plan is a specialised life insurance policy that can provide financial protection for your directors & employees. It provides a predetermined lump sum payout to an employee’s beneficiaries if they pass away while actively employed.
Let’s take a look at the key features of the best Relevant Life Insurance policies:
When you take out a Relevant Life Insurance policy for your employees, it guarantees that they will be covered for death and terminal illnesses. Aviva is the only provider that also includes critical illness in their Relevant Life Insurance policy.
Having Relevant Life Insurance for your company means that if the person covered dies or is diagnosed with a terminal illness while employed at your company, their beneficiaries will receive a lump sum of money. These funds can provide the employees with much-needed financial help to cover expenses such as funeral costs. If the employee is terminally ill, the Relevant Life policy may be paid out early to help cover care costs and other expenses.
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“In practice, the biggest advantage I see for directors is the tax efficiency. Instead of paying for personal life insurance from post-tax income, the company can fund a Relevant Life Plan and often save thousands over the life of the policy. But it only works if the plan is set up correctly in trust and tied to PAYE status.”
“A common misunderstanding I see is sole traders or traditional partners thinking they can take out Relevant Life. Unfortunately, HMRC rules are clear — you need to be an employee or director on PAYE. I’ve had cases where even accountants assumed otherwise, so it’s always worth double-checking.”
Relevant Life Insurance is designed for employees of a limited company, which includes company directors who are on the payroll. Both full-time and part-time staff can be covered, provided they are employed and paid through PAYE. This makes it a useful option not just for directors, but also for senior employees whose contribution is central to the business.
It does not apply to sole traders, traditional partnerships, or LLP members, as they are not classed as employees for this purpose. This is an important distinction, because many business owners assume all structures qualify — but the eligibility rules are tied specifically to PAYE employment status.
For directors, a Relevant Life Plan can be one of the most tax-efficient ways to provide life cover, since the company pays the premiums. If you are a contractor operating through your own limited company, you may also qualify if you are paid as an employee of that company. This can make Relevant Life especially attractive for one-person companies and contractor setups where traditional group life cover isn’t available.
“One point that often surprises people is that Relevant Life isn’t just for directors — key employees can also be covered. I’ve arranged policies for senior managers and specialist staff where losing them would have a major impact on the business. It’s not only about directors; it’s about protecting the value of people who are vital to the company.”
A Relevant Life Plan should be written into a discretionary trust from the outset. This helps ensure:
In practice, I place every plan into trust during application — it isn’t an optional extra. Without the trust, the plan can lose the key tax advantages that make Relevant Life attractive.
Premiums should also satisfy HMRC’s “wholly and exclusively” test for allowable business expenses — i.e., the policy must serve a genuine business purpose, not act as disguised personal cover.
For deeper technical detail, see these official sources:
– Authored & reviewed by Jody Pearmain, Director of My Key Finance Ltd
It’s advisable to set a maximum amount of cover based on the employee’s gross annual earnings and age. For example, 17-29 years old may have remuneration of up to 35x, while employees over 60 years old may have remuneration of up to 15x.
The amount of cover for a Relevant Life plan should be based on the lost income of the employee, including their salary, bonuses, benefits in kind and regular dividends.
“Relevant Life is brilliant for directors and small teams, but once a company grows past 10 employees, I often find a group life scheme can be more cost-effective and easier to administer. I usually run comparisons side-by-side so clients can see which route genuinely saves them more in the long run.”
To get the best cover for your company and staff, get in touch with My Key Man Insurance. As an insurance broker, we compare various lenders and policies to provide you with tailored coverage to suit your business requirements.
If you need more guidance on how to choose Relevant Life Insurance vs Life Insurance, we can walk you through your options and the factors to consider of both.
Contact us today to find the best business insurance for your company, directors and employees.
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Jody was very helpful in explaining the options and I thoroughly recommend his company
We received a wonderful service from mykeyman and will be using them again. The service and product knowledge from team is excellent. Everything was made easy to understand. The price was the best we found too.
I had a great time working with My Key Man Insurance when I applied for the different insurances they offer.They were able to answer all of my questions quickly and effectively. I will recommend them to my friends and family.
It is so amazing working with this insurance company. i have had many unpleasant experiences with some insurances company in the past but working with Mykey insurance has really change my opinion and believe about insurance company.
The standard of service was first class. They kept me up to date with progress on my Relevant Life Policy, followed up promptly following delays caused by my medical practice being slow in compiling reports, and responded instantly and clearly to any questions I had.
We received a wonderful service from mykeyman and will be using them again. The service and product knowledge from team is excellent. Everything was made easy to understand. The price was the best we found too.
Jody was very helpful in explaining the options and I thoroughly recommend his company
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Clear, UK-specific answers from our director to help you decide if Relevant Life is right for your company and employees.
Death in Service is a group employee benefit that pays a lump sum if an employee dies while employed and typically ends when they leave the company.
Relevant Life is an individual, employer-funded life policy set up for a single employee (often a director) and written into trust for their beneficiaries. It is not a group scheme and will normally end if the employee leaves unless a new employer takes it over or the cover is replaced.
The employer is the policy owner and premium payer. The plan is placed into a discretionary trust at outset; on a valid claim, the trustees receive the proceeds for the beneficiaries.
No. It can cover any employee of a UK business. It’s commonly used for directors and senior employees in SMEs because it’s typically more tax-efficient than personal life cover.
Insurers set limits by age and total remuneration (salary plus regular dividends/benefits). Typical maximums fall between 15× and 25× remuneration depending on age band, but exact multiples vary by insurer and underwriting.
No. Under HMRC rules for Relevant Life, cover is for death (and usually terminal illness) only. Critical illness cover is not permitted on a Relevant Life plan.
Yes. Relevant Life policies are set up in a discretionary trust so benefits are normally outside the employee’s estate for Inheritance Tax and can be paid to the intended beneficiaries efficiently.
Information is general guidance for UK businesses. Always check the specific insurer’s terms and your tax position with your accountant. Policy features and financial limits vary by provider and underwriting.
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The information on this website is provided for general guidance only and does not constitute financial, tax or legal advice. The suitability and tax treatment of any cover will depend on your individual circumstances and may change in the future.
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