Relevant Life Insurance
Relevant Life Insurance is a tax-efficient way for employers to provide life cover for an individual employee or company director. It's especially useful for businesses that don’t have a group life scheme in place but still want to offer valuable protection benefits.
Who is it for?
Relevant Life Insurance is ideal for:
Employers who want to provide death-in-service benefits to employees or directors.
Employees who want life insurance paid for by their employer, without the policy forming part of their lifetime pension allowance.
High-earning individuals or small business owners looking for a tax-efficient way to access personal life cover.
It’s not available to sole traders, equity partners in partnerships, or non-salaried shareholders.
Key Benefits
Tax-efficient premiums: Paid by the employer and usually treated as a business expense, meaning no income tax or National Insurance for the employee.
No impact on pension allowances: The cover does not use up the employee’s lifetime or annual pension allowance.
Trust-based payout: The policy is typically written into a discretionary trust, which allows for a tax-free lump sum payout to the employee’s beneficiaries and keeps it outside of their estate for inheritance tax purposes.
Cost savings: Relevant Life Insurance can be up to 49% cheaper than a personally paid policy for higher-rate taxpayers.
Policy Features
Covers one individual per policy.
Provides a lump sum payment on death or terminal illness (if life expectancy is less than 12 months) during the policy term.
No cash-in value or surrender value at any stage.
Cover amount is usually based on a multiple of total remuneration (salary, bonuses, dividends, etc.).
Optional Features (Policy Dependent)
Accidental death benefit: Temporary cover while the application is being processed.
Continuation option: The employee may be able to take over the policy personally if they leave the business, without the need for further medical checks.
Life event increase: Some providers allow you to increase the cover after major life events such as marriage, birth of a child, or a promotion—without needing new underwriting.
Business Benefits
A great way for small and medium-sized businesses to offer competitive staff benefits.
Helps attract and retain top talent by offering peace of mind and added financial security for employees’ families.
Demonstrates commitment to employee wellbeing in a cost-effective way.
How it Works
The employer takes out the policy for an individual employee or director.
The policy is written into a discretionary trust from the outset, naming the employee’s beneficiaries.
If the insured person dies or is diagnosed with a terminal illness during the term, a lump sum is paid to the trust for distribution.
Summary
Relevant Life Insurance offers employers a smart way to provide meaningful life cover to employees or directors in a highly tax-efficient manner. It’s especially beneficial for business owners and high-earning professionals who want personal cover without the drawbacks of personal taxation or pension limitations.