Relevant Life Insurance

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What is Relevant Life Insurance?

Relevant life cover explained. Your definitive guide From the UK No1 specialists

Relevant Life Insurance is a company-owned insurance policy. It allows businesses to offer life insurance cover to employees within a business.

Increasingly, company owners and directors are catching on to the benefits of a Relevant Life Insurance policy sometimes known as director’s life insurance. But it’s still probably one of the most undersold insurance policies on the market.

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?

Small businesses don’t have enough employees to be able to offer a registered death-in-service benefit. But there is an alternative!

    • Relevant life insurance for contractors.
    • Only UK Ltd companies or LLPs can take out the cover. Partnerships and sole traders can not.
    • The life assured must be a UK resident and a PAYE employee.
    • The policy must be written into a discretionary trust.

    The person insured must remain an employee of the company throughout the term.  Being a shareholder alone does not entitle you to take out cover.

    You can transfer the policy to a new company or to personal life insurance if needed.

Advantages of Relevant Life Cover

Offering Tax Efficient Relevant Life Cover to your employees is great for employee retention!

There are fantastic cost savings in using a relevant life plan due to its tax efficiency. But that’s not all. Have you considered how much your employees will appreciate having a death-in-service benefit? A policy which will pay out a tax-free lump sum of money to their loved ones in the event of their death. Offering your employees instant life insurance and financial protection for their families will be greatly appreciated and will help generate a much better working relationship between the company and its employees.

  • Premiums are paid by the company and are tax deductible.
  • 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 Allowance.
  • It can be up to 50% cheaper than personal insurance.
  • No national insurance contributions.
Relevant Life Calculator Example

The advantages stretch beyond the bottom line.

“Studies have shown that business owners who show care towards their employees and provide perks have lower staff turnover and also benefit from higher productivity.”

A relevant life plan functions as both: it functions as part of a company’s wellness program and also offers employees an incentive to stay.

Relevant Life Insurance Tax Treatment

Premiums can be offset against corporation tax!

Relevant Life Tax Pic

A relevant life trust forms the basis of the policy. Without a trust in place, the policy would not be set up correctly. 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?

Each policy is owned by the company with an employee as the person insured. A lump sum benefit is paid to the employee’s family in the event of death.

Historically, relevant life cover has only covered death and terminal illness. But we can now offer the option to include significant illness.

Aviva’s new ‘Relevant Life Plan with Significant Illness’ is available with the same benefits. It is a great add-on for those companies that want to go over and above for their employees.

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.
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Offering relevant life insurance to your employees will show that you care.  In the event of a claim, this will give them the financial support they need to help them focus on recovery.

How it works

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meet our team

Jody Pearmain
Jody Pearmain

Managing Director & Founder (My Key Finance Ltd)

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Lori Norton

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Tyler Pearmain

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Relevant Life Cover FAQ

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. The relevant life insurance cost will go up for higher sum assured policies.

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 add critical illness?

(UPDATED 2022) There is now the option to add significant illness to a policy. This is currently only available through AVIVA. Although similar to critical illness cover, there are some restrictions.

Terminal illness is included with all policies. A lump sum payout can be made early if the insured person is diagnosed with a terminal illness.

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.

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.

How long does it take to set up a policy?

Once you have a relevant life insurance 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.

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