Relevant life insurance
A relevant life insurance policy is the most tax efficient and cost effective way to get life insurance for businesses.
You could save as much as 49% on your standard life insurance premiums by taking advantage of this HMRC approved scheme. Relevant life insurance is designed to provide business owners and staff with cover to protect their families more cheaply.
*64% of businesses have not heard of relevant life insurance
iam|INSURED is a leading business and relevant life insurance experts and you can contact us on 0800 009 6559 or CLICK HERE.
What is relevant life insurance?
Relevant life insurance is a type a ‘death in service’ policy that can be provided to a business’s staff, directors, or owners.
It is fairly common for a big company to offer a death in service benefit to its staff as part of an employee benefit scheme. Wouldn’t it be amazing if a smaller company could offer this type of incentive to its employees at a low cost?
A relevant life insurance policy gives small business owners the opportunity to offer affordable life cover to its staff and directors.
Benefits to relevant life insurance
- Up to 49% Tax savings
- Extremely simple compared to group life insurance
- Owned by the business
- Corporation Tax relief on premiums
- No Benefit in Kind
- Portable (can be changed to personal cover)
The other key benefit to this type of cover is that it works in exactly the same way as a personal life insurance policy. This also means that the premiums are very affordable and applying for cover can be extremely simple.
Two main types of relevant life insurance
You also have the option to take out relevant life insurance on a level term or decreasing term basis. This means that you can specifically tailor your cover to suit the needs of you and your employees.
- Level term relevant life insurance: your cover amount will always remain the same throughout the term of your policy (family protection)
- Decreasing term relevant life insurance: the amount of cover will reduce throughout the term of the policy which is the same as mortgage life insurance
Relevant life insurance for directors
The most common reason for taking out relevant life insurance is for a business to provide cover for its directors or senior staff.
A company can take out multiple relevant life insurance policies to protect several directors or key members of staff. It is also possible for business owners to use this as a benefit for themselves as a tax-efficient alternative to personal life insurance.
Example for a small limited company
A small limited company has 2 directors and 3 employees working within the business. They could take out relevant life insurance for its directors to protect their families and provide a smaller amount of cover to its 3 employees, if they wanted to.
Most small businesses will take out relevant life insurance for its directors for tax benefits and to reduce the cost of life insurance for them.
Relevant life insurance comparison
There are several ways to compare relevant life insurance to other similar types of life insurance or business protection policies.
|Relevant Life Insurance||Personal Life Insurance||Group Life Insurance||Key Person Life Insurance|
|Provides family protection||YES||YES||YES||NO|
|Tax deductible premiums||YES||NO||YES||YES|
|Flexible (e.g. portable)||YES||YES||NO||NO|
|Critical illness Cover options||YES (limited options)||YES||NO||YES|
|Paid personally or by company||COMPANY||PERSONALLY||COMPANY||COMPANY|
You can also quickly and easily contact one of our business insurance experts to get FREE advice on 0800 009 6559 or CLICK HERE.
A relevant life insurance policy is a great way to offer life insurance to your employees and SAVE money. The tax benefits for this type of cover mean that it’s an extremely appealing option for many business owners.
Who can have a relevant life policy?
There are a few very simple rules to qualify for relevant life insurance and for how much cover you can have.
Some of the rules that apply to relevant life insurance are:
- Employees of a sole trader, limited liability partnership, limited company, or charity that qualifies
- Employees aged between 16 and 73
- Company directors or employees
- No surrender value
- Retirement benefit so no critical illness cover (unless serious enough to prevent the person from working again in the future)
- Cannot be set up specifically to avoid paying tax
- Premiums must be proportionate to salary
- Sum assured must be reasonable
Most importantly, relevant life insurance is a flexible product so can be taken on a level term or decreasing term basis. You can also index link the sum assured so you can future proof your cover.
Relevant life insurance HRMC scheme
Businesses are constantly looking for ways to improve their tax efficiency but are also quite rightly cautious about new schemes.
Relevant life insurance was introduced in 2014 by the HMRC under the rule **‘EIM15045 – Employer-financed retirement benefits schemes: relevant life policies’.
EIM15045 outlines the tax benefits that are offered under the scheme which allows employers to provide tax-efficient retirement benefits. This means that employees and directors can take advantage of tax savings on life insurance premiums.
Under the scheme there are three allowable types of life insurance policy, which includes:
- Life policies with excluded benefits
- Excepted group life policy
- Policy for an individual that would otherwise be an excepted group life policy
Most insurers introduced its own relevant life insurance policy in line with the HMRC regulation to attract more business customers. Since 2014, the number of businesses taking advantage of EIM15045 rules has steadily increased.
One of the rules for this scheme is that the premiums must be affordable by the individual insured and so beware of higher premiums for people on lower salaries.
You should also speak to your accountant or a tax expert to get proper advice if you are unsure about how the scheme works.
Relevant life insurance P11D
This is another big advantage to setting up a relevant life insurance policy, it is very simple to administer.
There is no ‘Benefit in Kind’ element to your relevant life insurance premiums and so there’s no P11D requirements. You won’t need to disclose this on your personal tax returns as the premiums are purely to be paid through the business.
Your accountant will be able to advise you properly and will know where to declare this in your company accounts. It is advisable to speak to your accountant about this before you take out cover.
Best relevant life insurance
There are a few options for relevant life insurance and there are lots of insurers that offer this type of cover.
The best relevant life insurance cover might be different for you than someone else so it’s well worth shopping around. You should also get advice from an expert who can search the market for you to find the best policy.
One of the main benefits of looking for relevant life insurance is that it’s easy to compare because most policies are the same. Essentially this is a standard life insurance policy that pays out on death so generally it comes down to price.
Some of the top relevant life insurance companies are:
- Legal & General
- Royal London
You should also consider that underwriting is important so if you have any health conditions or lifestyle disclosures, you might need to speak to a specialist.
Some insurers also have different restrictions to others in terms of the amount of cover available and term so you should check terms and conditions carefully. There are also some rules from the HMRC that will need to be considered by your accountant.
Relevant life insurance meaning
The term of a ‘relevant life’ refers to a person or individual within a business that is eligible under HMRC rule EIM15045 (Employer-financed retirement benefits scheme: relevant life policies).
To be eligible you must qualify under the rules stated by the HMRC as a ‘relevant life’ or person to be insured.
Need relevant life insurance advice?
It is important to make sure that you pay the right price and get the best cover to protect your home and your family. You can speak to one of our EXPERTS to get FREE and FRIENDLY advice by calling 0800 009 6559 or CLICK HERE.
Our normal office hours are:
- Monday to Thursday 8am to 8pm
- Friday 8am to 3pm
- Saturday 10am to 2pm
* according to figures provided by Legal & General