What is Relevant Life Cover?
Relevant Life Cover is a tax efficient way for small businesses to provide stand-alone, single life, death in service cover. It is designed to provide a death in service benefit for employees of small companies and high earning individuals (including salaried directors). And as it will need to be written in trust – it will then pay a tax-free lump sum to the beneficiaries or dependants if the person covered was to die or was diagnosed with a terminal illness whilst employed during the term of the plan.
Benefits for employees
Relevant Life Cover premiums don’t count towards an individual’s allowance for tax purposes, other advantages include:
- Benefits are payable free of Income Tax
- Benefits are usually free from Inheritance Tax (however, in specific circumstances there may be a periodic tax charge on the trust)
- Any benefit paid as Relevant Life Cover would not count towards the employee’s lifetime allowance for pensions
- The employee can increase the amount of cover without additional underwriting (within certain limits) with a Guaranteed Increase Option
Why a Relevant Life Policy?
Many clients I see already have personal life insurance that is being paid for personally from their own bank accounts. Since the introduction of relevant life policies these clients can often make significant savings by having their limited companies pay for their premiums instead. Normally when a limited company takes out a non registered non group life insurance for an employee or director the employee has P11D benefit in kind issues and they may as well have paid for the cover themselves. However the relevant life policy is set up under a special trust and gets around this issue by using pension legislation.
Relevant Life is suitable for anyone who is an employee of a Limited Company, even if you are the only employee!
A large percentage of the clients that I have helped set up relevant life policies, have been IT contractors. Many of these contractors have been used to having death in service cover from their employers. When they start contracting they lose this important employee benefit. Many IT contractors work through their limited companies and thus taking advantage of a relevant life policy is an ideal solution to plug the gap that they have lost from the loss of their previous death in service that they had.
Central Financial Services offers a complete one stop solution for your Business Insurance needs.
These needs can be far more than you had realised and taking professional advice can ensure you make an informed decision about your business protection needs.
You wouldn’t drive your car without having insurance so why risk your business!