Relevant Life Insurance
A relevant life policy is available to employees, including salaried directors, setup by the company to pay tax free lump sum in the unfortunate event of death.
to discuss Relevant Life Insurance
It is a tax efficient life assurance policy that is written in trust.
Premiums are paid for by the employer and usually treated by HMRC as a business expense.
It can be used as part of an employment package to incentivise staff, at a relatively low cost.
Who might benefit?
- Limited company salaried directors
- Businesses too small for group life scheme
- High earning employees
- Company may benefit as used to attract and retain staff
Amount of cover
The maximum amount of cover available depends on the employee’s age and remuneration and is reduced if the employee already has any family protection cover in place.
- 17-29 years old Up to 35x remuneration
- 30-39 years old Up to 30x remuneration
- 40-49 years old Up to 25x remuneration
- 50-59 years old Up to 20x remuneration
- 60+ Up to 15x remuneration
What make this policy so good for company directors
- You make tax savings compared with paying for it personally
- Payments are normally classed as a business expense
- Keeping the plan in trust offers the potential to plan for inheritance tax if your estate is worth more than the current inheritance tax threshold
For small business
As an owner-operator of a small business, you may work full-time and employs two others. You cannot access a full-group life scheme but can have access to a relevant life policy.
This chart explains how the costs work
| Owner | Employee | Trainee | |
| PREMIUM | £100 per month | £70 per month | £30 per month |
| Employee National insurance | none | none | none |
| Income tax | none | none | none |
| Total company gross cost | £100 per month | £70 per month | £30 per month |
| Employer NIC | none | none | none |
| Less corporation tax (assuming 20%) | £20 per month | £14 per month | £6 per month |
| Tax adjusted cost | £80 per month | £56 per month | £24 per month |
FAQs
for
Relevant
Life
Insurance
What is relevant life insurance?
Relevant life insurance is a type of individual life insurance policy arranged by a company for an employee or director. It provides a lump sum payout on death while the individual is employed by the business.
Who is relevant life insurance suitable for?
Relevant life insurance is commonly used by company directors, business owners, and high earners who want life cover provided through their company rather than as a personal policy.
How does relevant life insurance work?
The company takes out the policy, pays the premiums, and the policy is written into a trust for the benefit of the employee’s chosen beneficiaries. If the insured person dies during the policy term, the lump sum is paid to the trust.
How is relevant life insurance different from personal life insurance?
Relevant life insurance is arranged through a company and can be more tax-efficient for certain individuals. Personal life insurance is arranged privately and paid for from personal income.
Is relevant life insurance tax efficient?
Relevant life insurance can offer tax advantages in some circumstances, such as premiums potentially being treated as a business expense and benefits not forming part of the employee’s estate. Tax treatment depends on individual and business circumstances.
Does relevant life insurance count towards pension limits?
No. Relevant life insurance is separate from pension arrangements and does not count towards pension lifetime or annual allowance limits.
Can relevant life insurance cover critical illness?
No. Relevant life insurance is designed to provide life cover only. It does not usually include critical illness or income protection cover.
Who receives the payout from a relevant life policy?
The payout is made to a discretionary trust, which then distributes the funds to the beneficiaries nominated by the insured individual.
What happens to relevant life insurance if I leave the company?
If employment ends, the policy usually stops. Some insurers may allow the policy to be converted into a personal life insurance policy, subject to their terms.
