RELEVANT LIFE COVER

RELEVANT LIFE INSURANCE

Relevant life insurance is individual life insurance designed to replicate death in service for a single employee where there are not enough members to warrant a group life insurance scheme. The life insurance is owned by the business.

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What Is Relevant Life Cover?

Like a standard life insurance policy, these products pay out a lump sum to the insured person’s beneficiaries on the death of the insured. 

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How Does It Work?

The amount a life policy pays out is based on the multiple of the employee’s salary. It will be the businesses decision how much the life policy will be and will pay out on death or terminal illness. An insurance advisor will be able to guide.

Some plans, known as ‘level’ life policies, are for a set lump sum amount agreed when the insurance was purchased while others are linked to inflation. It is also possible to have guaranteed increases of life cover written into the terms, to cover larger mortgages or pay rises in the result of death.

Relevant life insurance policies are not treated as a benefit in kind, so no income tax is payable, nor are they subject to inheritance tax. Adding to their tax efficiency, businesses can also declare the premiums as a business expense to lower their corporation tax bill.

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Who Can Have Relevant Life Cover?

You can apply for relevant life insurance cover for one or more of your employees if they are.

• Sole traders

• A Shareholder Partnership

• A limited liability Partnership

• A limited Company

• A charity Organisation

The following generally cannot be covered by a relevant life insurance policy…

Employees can only be insured with relevant life cover if they work for the business in a PAYE capacity and are UK residents.