Relevant Life Insurance
Offer protection to your employees or directors
and give them peace of mind against terminal
illness or death.
Relevant Life Insurance
In businesses that are too small to consider setting up comprehensive group protection programmes, relevant life insurance is a cost-effective solution to set up individual death-in-service benefits for personnel.
The company insures the plan on the life of the employee, although there are cases of employees at the director level insuring themselves. You can customise the cover to meet your own needs.
What is Relevant Life Insurance
In businesses that are too small to consider setting up comprehensive group protection programmes, relevant life insurance is a cost-effective solution to set up individual death-in-service benefits for personnel.
The company insures the plan on the life of the employee, although there are cases of employees at the director level insuring themselves. You can customise the cover to meet your own needs.
Are Relevant-Life Plans Cost Effective
Relevant Life Plans are specially created to meet your demands. When arranging an equivalent personal life insurance policy, the cost to the employer may be significantly less than the cost to the individual.
HMRC often views this kind of plan as an allowable business expense, and all premiums and benefits paid are fully eligible for Income Tax, National Insurance, and Corporate Tax reduction.
This indicates that if the employee is a higher rate taxpayer, premiums could be lowered by up to 49% in comparison to a standard life insurance coverage. This amount might reach 40% for a base rate taxpayer.
What are the Benefits of Relevant Life Insurance
Employers can provide life insurance benefits with terminal illness coverage through relevant life insurance at a reasonable price.
Offering a pertinent life insurance policy as part of a comprehensive benefits package can increase your company’s appeal to candidates, assist in keeping and rewarding current staff members, and give off the impression that you are a trustworthy and caring employer.
Relevant life insurance can be an economical option for smaller businesses to provide similar benefits to their larger competitors when trying to attract employees because it can also assist employers lower their tax obligations.
Since premiums are usually classified as business expenses, they are likely eligible for a tax deduction. If an estate is, or is anticipated to be, worth more than the current inheritance tax level, keeping the plan in trust may allow an employee to make plans for inheritance tax.
Is a Relevant Life Policy a Benefit-In-Kind
Relevant life cover is tax deductible and not classed as a P11D benefit-in-kind by HMRC. Employees covered by it also don’t have to pay income tax on the premiums. Both the business and employee don’t have to pay National Insurance contributions either.
Relevant Life Insurance Cover Explained
Who Does Relevant Life Insurance Cover
A relevant life insurance policy covers the following types of individual:
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Employers looking to provide death-in-service benefits, but with too few employees to set up a group scheme.
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Directors wishing to provide their own individual death-in-service’ benefits without taking out a scheme on all employees.
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High earning individuals, such as directors, where death-in-service does not form part of their ‘lifetime allowance’ (£1.073 million 2022/23).
Employer-provided life insurance that is personalised for you and your employees is known as a Relevant Life Plan. Relevant Life Plans are a cost-effective option to provide employee life insurance if your organisation is not fit to a group life scheme because it does not count towards annual or lifetime pensions. One of a Relevant Life Plan’s main characteristics is:
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The plan is designed to provide life cover for an employee while working for you. This may include directors.
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Your business pays regular premiums based on the level of cover.
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If the employee covered dies or is diagnosed with a terminal illness (with a life expectancy of less than 12 months) whilst in employment during the term, the plan pays out a cash sum.
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The plan is designed to meet certain legislative requirements that mean your premiums, benefits and options should be treated tax efficiently.
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The policy must be placed into a Relevant Life Plan Trust, which can be tax-efficient for both employee and employer.
How should the Relevant Life Plan be set up?
The Relevant Life Plan should be set up so that:
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It’s a single life policy.
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The employee is the person covered.
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The employer pays the premiums during employment.
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The policy is written in trust from the outset, using our Relevant Life Plan Discretionary Trust. This means that it will benefit the person covered and their family and financial dependants.
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The plan ends by the time the employee is 75.
How is the Lump Sum Amount Calculated