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.