What is Relevant Life Cover?
As an owner of a limited company, a relevant life policy will provide you or your employees with the employee benefit of a cash lump sum paid upon death or diagnosis of a terminal illness to you or the employees family.
The policy is paid for by the business, which can mean a number of advantages compared to a normal personal life insurance policy. Most significantly, it can be tax efficient and result in savings of up to 50% on the premiums, depending on your tax band.
Relevant Life cover can provide a ‘death in service’ benefit to your staff. meaning the business can offer a benefit which can help attract and retain employees. This may be of interest if you don’t have enough employees to acquire a group life policy, or if you only wish to cover certain people within the business.
By arranging a relevant life policy the payout in the event of death oes not form part of the pension lifetime allowance which is the case for many group schemes.
Other advantages of a relevant life policy include:
- Death benefit usually free of inheritance tax.
- Sum insured of up to 25 times the life assured’s annual remuneration.
- Must be written into trust** for the benefit of your chosen beneficiaries, meaning the sum gets paid out much quicker than waiting for probate.
*The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.
**Trusts are not regulated by the Financial Conduct Authority
“69% of businesses had never heard of a relevant life plan” [stated in Legal & General’s State of the Nation’s SMEs 2019]