Life Insurance
RELEVANT LIFE – WHAT IS IT AND SHOULD I HAVE IT?
Are you a Director? Do you have employees? Paying Life Insurance personally? Then read on.
A relevant life policy is, at its most simplistic, a life insurance policy that is set up to provide a death benefit for an employee or Director.
If you are a business owner, you perhaps should investigate switching death-in-service policies for relevant life policies. There are benefits including tax advantages and portability, which make the policy such an attractive consideration.
Like a death-in-service policy, a relevant life policy can provide a lump sum to an employee’s family and dependents should the unthinkable happen. However, unlike a death-in-service policy, a relevant life policy sits outside of an individual’s pension provisions meaning any pay-out will not be subject to a lifetime allowance test and that is one reason why they are proving popular with business owners and company directors.
Death in service insurance policies are a common benefit provided to employees by their employers. They are typically offered through a pension scheme and count towards the individual’s tax-free pension allowance.
Relevant life policies also bring attractive tax advantages for business owners and company directors.
Relevant life policies are considered a business expense and are shown in the profit and loss and are therefore paid before taxable profits are generated thereby saving Corporation Tax. They require no contribution from the employee whatsoever and importantly they do not count as a taxable benefit in kind for the employee.
Another important advantage is that relevant life policies are portable. If an employee leaves the company, or the firm is wound up, the valuable death-in-service benefit will be lost. Replacing such cover may prove expensive or unobtainable, especially for older members or those with pre-existing medical conditions.
The responsibility for a relevant life policy however can be transferred to the member, allowing the member to take over the premium payments to maintain the cover even after they have left the original sponsoring employer.
Relevant life policies may require full medical underwriting on the life assured, unlike death-in-service benefits, increasing the amount of time and administration in setting up such plans, which may not be feasible for a larger workforce.
It is important that business owners take independent financial advice to ensure any new applications or changes to existing cover are appropriate for their individual business and personal circumstances.
If Relevant Life is of interest to you, please do not hesitate to get in touch and we can talk to you in more detail, so contact us today, we have Chartered Accountants and Tax Advisers in Canary Wharf, Essex and Manchester waiting for your call.
