Relevant Life cover is a tax-efficient form of life insurance which employers take out on behalf of a single employee. Unlike a regular life protection policy, it is only available to businesses.
If the employee covered by the policy is to sadly pass away, their family is supported with a lump sum payment.
The insurance was introduced as a means of offering small businesses a way of accessing cost-effective life cover. Companies who wish to cover multiple employees are better off choosing a Group Life scheme.
Once the employer identifies which worker they’d like to insure, they need to decide how much coverage they’d like to offer. Employers will usually offer coverage based on a multiple of the person’s salary.
For example, if the employee is earning £40,000 a year, the company may choose to offer 2x, 4x – or even up to 15x their salary. If you’ve opted to offer 2x the salary then the employee’s designated recipients, will stand to receive £80,000 as a tax-free lump sum should the employee pass away.
A business can take out Relevant Life Insurance in two ways:
Many of the major insurance providers now offer Relevant Life Insurance, but terms will vary as will the premium (the price of the insurance policy). This makes it important to source a range of quotes and sift through the details of each policy on offer.
A professional health insurance broker will have expertise across the whole employee benefits marketplace – and can explain policy terms in easy-to-follow language.
Once the Relevant Life policy has been purchased, the scheme is placed into a Trust – which means the employee’s loved-ones avoid a hefty tax bill in the event of a payout. (Once the money is placed into a trust the employee technically no longer owns the money if they die – so it’s not counted towards inheritance tax.)
The businesses which stand to benefit most from Relevant Life Insurance are those wishing to cover a single person, which usually means small businesses.
It’s likely to be a cost-effective option if:
According to AIG’s figures, Relevant Life Insurance can save £40/month compared to a Personal Life Insurance policy. This is because:
If life insurance is instead taken out as a personal plan, the individual will be paying for it from their net income, after tax and National Insurance has already been paid by employee and employer.
Relevant Life Insurance demonstrates that you genuinely care about your employee. Like any life insurance scheme it provides piece-of-mind that an individual’s loved-ones are financially supported should the worst happen.
There are several factors which affect the premium.
From the employer’s side:
From the individual’s side:
Clearly, due to all these variables, the cost of taking out Relevant Life can vary markedly. For example, it can start from as little as £5.31/month for a young healthy person with minimal coverage.
To get a customised Relevant Life Insurance quote use the form on the right or click the Quote button at the top of the page.
“Engage have provided us with an exceptional service, everything is explained in a very clear, concise and informative manner allowing us to make the right decisions”
There are two general ways you can go about purchasing an insurance product:
It’s usually advised that you employ the services of an independent insurance broker like Engage because we can provide an insider’s perspective on how it works from purchase to claim. Plus, a consultant like Engage will have your best interests at heart, unlike an insurance provider who will have a vested interest in promoting a deal which suits their commercial needs.
Benefits of using an insurance broker:
Benefits of going direct to the insurer:
Many of the major insurance companies provide Relevant Life Insurance policies, including:
Each will offer different price points and features, such as funeral services, online GP services, counselling support and more.
Would you like to speak to a Relevant Life Insurance broker? Call the team at Engage on tel: +44 (0)1273 974419
It certainly shouldn’t be. Assuming the policy is implemented in the right way, it will not count as a P11D benefit. Consequently, there will be no additional tax to pay.
It certainly shouldn’t be. Assuming the policy is implemented in the right way, it will not count as a P11D benefit. Consequently, there will be no additional tax to pay.
A policy can last up until the employee is 75 years-old.
Yes it can. Many insurance providers will give you an option to include coverage for serious illnesses. The definition of what constitutes a critical illness will vary from provider to provider.
It’s worth noting too, that most insurers will include cover for a terminal illness where the employee has a life expectancy of less than 12 months.
A Relevant Life policy is specifically designed for small businesses, enabling them to take out life insurance for an employee through the business, thereby making it more tax efficient.
As mentioned above, AIG estimate that you can save £40/month compared to a regular personal plan by avoiding NI contributions and being able to claim back the cost as a business expense.
A regular Life Insurance policy works out costing more as it’s purchased by a private individual.
Another option is to take out a Group Life policy which can cover two or more employees.
