RELEVANT LIFE INSURANCE
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What is Relevant Life Insurance?
Historically, only large companies have been able to offer death-in-service benefits to their employees via company group life schemes. The schemes typically pay between 4 and 5 times the salary on death.
But with Relevant Life Cover, small and medium companies can now offer the same. Many of our clients only have between 1 to 5 people employed.
If you are the owner of a small company or one of the company directors, it’s certainly worth thinking about even if it’s just for yourself.
With Relevant Life Assurance, you can save up to 50% against the equivalent personal life insurance. So both the business and the employee benefit. So, if you are a company director looking to take out a life insurance policy, why would you ignore relevant life cover?
Try out our relevant life calculator and work out how much you can save. Alternatively, why not just compare relevant life insurance quotes online?
Who can take out a Relevant Life Policy?
Relevant Life Insurance is typically available to small businesses or
employers who want to provide life insurance for their employees.
It is commonly used by businesses that may not have enough employees to establish a traditional group life insurance scheme. Eligibility for Relevant Life Insurance may vary depending on the insurance provider and local regulations, but generally, the following criteria apply:
- Employees: Relevant Life Insurance is typically available to employees of the business or organization. This can include full-time, part-time, and even certain contract or freelance employees, depending on the insurance provider’s guidelines.
- Age: The covered employee usually needs to be within the age limits set by the insurance provider. Typically, employees must be between 18 and 75 years old, although age limits can vary.
- Employment status: The employee must be currently employed by the business or organization, and the policy is typically terminated when the employee leaves the company.
- Minimum and maximum benefit amounts: Insurance providers may have minimum and maximum benefit amounts that employees must meet to be eligible for Relevant Life Insurance. These amounts can vary based on factors such as the employee’s salary, job role, and other considerations.
- Citizenship or residency: The covered employee will need to be a resident of the UK.
Advantages of Relevant Life Cover
Offering Tax Efficient Relevant Life Cover to your employees is great for
employee retention!
- Premiums are paid by the company and are a tax deductible business expense.
- Any benefits are paid as a tax-free lump sum and are usually free from inheritance tax.
- All policies are set up using a discretionary trust which speeds up benefit payments.
- Plans will benefit high-earning employees as these plans do not count towards a pension lifetime allowence.
- It can be up to 50% cheaper than personal insurance.
- Employees don’t need to pay income tax or National Insurance on premiums.
Relevant Life Insurance Tax Treatment
A discretionary trust forms the basis of the policy. Without a trust in place, the policy would not be set up correctly and the tax benefits would not apply. This is quite easy to do and with most life insurance providers, we can set this up for you online.
Is a relevant life policy a benefit in kind?
HMRC will treat the premiums as an allowable business expense which means they are not included as a P11D benefit in kind. This means the premiums and benefits usually qualify for relief on the:
- Income tax
- Capital gains tax
- Corporation tax.
- National insurance
Of course, rules on taxation could change. But for now, you are looking at huge savings against normal life plans in a tax-efficient way. You can read more details on relevant life HMRC tax treatment here
Who Owns A Relevant Life Policy?
The policy is typically owned by the business or employer on behalf of the
covered employee.
The business or employer pays the premiums for the policy and retains ownership of the policy throughout its term.
As the policy owner, the business or employer has certain rights and responsibilities, which may include:
- Paying premiums: The business or employer is responsible for paying the premiums for the policy which is an allowable business expense.
- Designating beneficiaries: The business or employer may have the right to designate the beneficiaries who will receive the tax-free death benefit in the event of the covered employee’s death. This may be done when the policy is initially set up or through subsequent beneficiary designation changes.
- Managing policy details: The business or employer may have the ability to manage certain policy details, such as updating contact information, changing coverage amounts, or modifying policy riders or features, as allowed by the insurance provider and policy terms.
- Policy termination: The business or employer may have the right to terminate the Relevant Life Insurance policy, for example, if the covered employee leaves the company.
What is the difference between Key Person Insurance and Relevant Life Cover?
Key Person Insurance and Relevant Life Cover are two different types of life insurance policies that serve different purposes in the context of business insurance.
Key Person Insurance is a policy that a business or employer can take out on the life of a key person within the organization. This key person is usually a key employee or business owner who is critical to the success and continuity of the business. The purpose of Key Person Insurance is to protect the business from financial loss in the event of the key person’s death or disability.
Relevant Life Cover is a type of life insurance policy that is designed for small businesses or employers to provide life cover for their employees. It is a policy that is set up by a business or employer on behalf of an employee and is typically used to provide a tax-efficient life insurance benefit to the person covered and their beneficiaries in the event of their death.
Unlike Key Person, Relevant Life Cover is typically not focused on protecting the business from financial losses but rather providing a valuable employee benefit for the covered employee and their family. Please check out our dedicated page for more information or quotes for key person insurance.
What is covered?
Death and terminal illness are covered by all policy providers. Aviva is the only provider to include a serious illness option.
Some providers will also allow you to add:
- Increasing Cover – The sum assured can automatically increase along with RPI or a fixed percentage.
- Life Change Benefit – If the life-assured circumstances change, you take out additional cover without the need for further medical underwriting.
Relevant Life Cover FAQ
In general, policies are limited to twenty times the value of a person’s salary. If a person is earning £40,000, then the amount of cover could be an £800,000 tax-free lump sum. The limit for a relevant life quote is 20 x salary. Normally, a provider will accept a policy under £500,000 without the need for financial evidence.
The 1st step is to run through an application which is mainly questions relating to medical history. This can be submitted over the phone with an advisor or online using our new online application.
Once an application is submitted, it can either be accepted straight away or referred to underwriting. On acceptance, the advisor will notify the company and the policy can start on your chosen date.
No. Only employees of a UK Ltd company or UK LLP are eligible. Freelance workers, the self-employed, and sole traders will need to look at personal cover.
Yes, the company must be registered in England, Wales, Scotland, or Northern Ireland to be eligible. Overseas applications are not accepted.
Yes, when it comes to taking out this type of insurance policy, an LLP is treated the same as a Limited Company.
This will normally be dependent on their current salary. But there isn’t a fast rule on how much cover someone will need. Many employees follow the 4x salary rule taken up with a group life scheme. It’s really down to yourself and the employee and, of course, how much you are willing to spend on premiums. But in essence, small companies can now offer a death-in-service benefit or group life insurance to their employees.
Once you have a quote and are happy with the price, you can go ahead with the application. The length of time between submitting an application and the policy going live is determined initially by the life-assured age and the sum assured. A young person with a relatively low sum assured can be accepted straight away online. However, it depends on the complexity of the application, including the health and lifestyle of the person.
Generally, a person over 40 with an amount of cover of more than £500,000 will probably need further underwriting. This could include a nurse screening and a request for further medical evidence.
Why Choose Us?
- MyKeyManInsurance.com started in 2008 we are the longest-serving business protection specialist in the UK.
- You deal directly with us we do not pass on your details to any third parties.
- The ONLY Website where you can quote and apply online.
- FCA-authorised advisers with years of experience in business insurance.
- We are a whole market broker able to quote from all the UK providers.
- GUARANTEED Lowest Relevant Life Insurance Rates In The UK.
- Free trust set up.
- 5 Star Trust Pilot reviews, our customers love us!
How it works
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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.
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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.
What’s the maximum amount of cover?
In general, policies are limited to twenty times the value of a person’s salary. If a person is earning £40,000, then the amount of cover could be an £800,000 tax-free lump sum. The limit for a relevant life quote is 20 x salary. Normally, a provider will accept a policy under £500,000 without the need for financial evidence.
How does the application process work?
The 1st step is to run through an application which is mainly questions relating to medical history. This can be submitted over the phone with an advisor or online using our new online application.
Once an application is submitted, it can either be accepted straight away or referred to underwriting. On acceptance, the advisor will notify the company and the policy can start on your chosen date.
Can anyone take out a Relevant Life Policy?
No. Only employees of a UK Ltd company or UK LLP are eligible. Freelance workers, the self-employed, and sole traders will need to look at personal cover.
Can we take an income as appose to a lump sum?
Yes, we can arrange a policy to pay out monthly amounts. You may even be more suited to a key person income protection policy.
Does it have to be a UK company to take out the cover?
Yes, the company must be registered in England, Wales, Scotland, or Northern Ireland to be eligible. Overseas applications are not accepted.
Can an LLP take out Relevant Life Cover?
Yes, when it comes to taking out this type of insurance policy, an LLP is treated the same as a Limited Company.
How much should I insure the person for?
This will normally be dependent on their current salary. But there isn’t a fast rule on how much cover someone will need. Many employees follow the 4x salary rule taken up with a group life scheme. It’s really down to yourself and the employee and, of course, how much you are willing to spend on premiums. But in essence, small companies can now offer a death-in-service benefit or group life insurance to their employees.
How long does it take to set up a policy?
Once you have a quote and are happy with the price, you can go ahead with the application. The length of time between submitting an application and the policy going live is determined initially by the life-assured age and the sum assured. A young person with a relatively low sum assured can be accepted straight away online. However, it depends on the complexity of the application, including the health and lifestyle of the person.
Generally, a person over 40 with an amount of cover of more than £500,000 will probably need further underwriting. This could include a nurse screening and a request for further medical evidence.
Further Reading
5 Reasons You Should Take Out Relevant Life Insurance
Relevant life insurance is a type of life insurance policy that is taken out by businesses on behalf of their employees
Relevant Life Insurance HMRC Tax Treatment (updated) 2022
Relevant life insurance is a form of insurance that provides financial protection for an individual.
Relevant Life Insurance Calculator
Work out how much money you can save with our relevant life calculator. Our calculator
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