Relevant life insurance is a term assurance plan enabling employers to offer tax-efficient personal life cover to staff. It’s a type of business life insurance, an umbrella term for a range of policies that financially protect your business and its workforce.
What is relevant life insurance?
Relevant life insurance provides individual death in service benefit for staff members, with a lump sum paid out in the event of their death. Also known as relevant life cover, it also pays out on diagnosis of a terminal illness or a critical condition listed in the policy.
Although referred to as ‘death in service’, a death does not have to happen at work or whilst an employee is carrying out company business to be covered. The insured person just needs to be on the payroll at the time of their death. A policy is designed to be written in trust at the outset, with beneficiaries named.
What are the benefits of relevant life insurance?
Relevant life cover is one of a range of business life insurances that protect your firm day-to-day and give you and your employees financial peace of mind.
Benefits of relevant life insurance include:
- An attractive benefits package for employees, enabling your business to recruit and retain high-quality candidates
- Portability, also known as continuation cover. If the insured person moves to a new job, they can take the policy with them, continuing to meet premiums themselves or with their new employer taking over payments
- Corporation tax relief on the payments for the employer, as long as the premiums are wholly and exclusively for the purposes of the business
- No National Insurance contributions to pay on the policy payments
- For the employee, the policy payments aren’t taxed as a benefit in kind
Also, policy payments and benefits don’t count towards annual or lifetime pension allowances
Does my business need relevant life insurance?
Relevant life insurance is suitable for many types of business, especially micro and small businesses with too few employees to be able to offer a group scheme.
Larger businesses wanting to insure a small number of staff or one individual employee can also benefit, as can those wishing to offer cover not in line with their group scheme to one or a few employees. It can be particularly useful for company directors and high-earning members of staff.
A relevant life plan is unsuitable where there isn’t an employer-to-employee relationship, such as sole traders, equity partners or equity members of a Limited Liability Partnership. The plan must also end before the insured person turns 75.
What does relevant life insurance cost?
The cost of relevant life insurance depends on the level of cover in place, which is based on the employee’s age and salary, as well as bonuses and benefits in kind. It might also depend on any other life cover policies in place. The maximum amount of cover available tends to be between 10 and 25 times the insured person’s remuneration package.