Relevant Life Insurance - Red Sky Insurance

Relevant Life Insurance

Relevant Life Insurance

Relevant life insurance is a cost-effective way to set up individual death-in-service that benefits the staff in companies that are too small to consider setting up a full group protection scheme.

Many small business owners would love to offer their employees or directors financial perks such as life insurance. Unfortunately setting up a group scheme can be expensive, especially if there are not many staff.

Relevant life insurance is a form of death-in-service benefit that is set up and paid for by a company but pays out to a staff member or directors’ beneficiaries on behalf of their death or in the event that they are diagnosed with a terminal illness. The relevant life cover is typically used by small businesses that aren’t too big but want to provide additional benefits for their directors and staff.

Similar to a traditional life insurance policy, an individual is assessed based on how much cover is required, this all depends on their health, age and lifestyle. The amount you cover may be based on something as simple as multiple of salary. Though for directors and some staff you may wish to consider the wider financial impact their death may have on their family.

Rather than the individual paying the policy, the business does although this is not classed as a benefit in kind. If the person is covered but unfortunately passes away while working for the company it pays out a lump sum, tax-free, to their beneficiaries which is usually family.

The business will also benefit from tax relief on the premiums paid, as this type of policy is classed as an allowable business expense.

Things To Consider

  • Provide individual death in service benefit to your employees
  • Available to employees of a company registered in the UK
  • An allowable business expense, so the business can claim tax relief on the premiums paid.
  • Are not a P11D benefit and therefore do not affect the employees income tax position
  • Set up in trust so this ensures proceeds are paid to family member(s)

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    You may want to consider life insurance if you have a mortgage and you want to leave a debt free estate, or if there are people who rely on you financially, like your partner or children. Life insurance can also help cover the cost of funerals, or even if you want to leave your children something when you pass away.
    Life insurance can be set up to cover a specific length of time or even for the whole of your life. Various factors will determine the cost, such as age, health and level of cover. You can control who the money will be paid to and for how long you want the policy to be in place.
    Under current tax rules, pay-outs for critical illness, terminal illness and death claims are usually free of personal liability to pay income tax and capital gains tax. However, in some circumstances your pay-out may be subject to inheritance tax. You can normally help avoid this by putting your plan in trust. Bear in mind that the law relating to tax may change in the future. (For tax planning, we act as introducers only)
    When you choose to take out a life insurance policy with one of our providers, they pay us a commission. Our service is always fee-free.
    This depends on your individual circumstances as the amount of cover required is often different for each family. If you are married, have a large mortgage and four children then you are likely to need more cover than a single parent living in a rented flat with one child.
    Yes, you can have more than one life insurance policy.
    Many couples take out joint life insurance policies, due to the convenience and in order to save money, as it is cheaper than taking out policies on an individual basis. However, joint life insurance usually only pays out once, on the first death, leaving the surviving partner without cover.

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