Relevant Life Insurance

What is relevant life insurance?

Relevant life insurance is a type of life insurance which pays a lump sum (tax-free) to loved ones, in the event of the death or a terminal condition diagnosis of the policyholder, whilst in employment. Relevant life insurance is paid for by an employer for an employee as a type of benefit to motivate employees and attract new talent into the business.

Relevant life insurance vs group life insurance policies

Many large businesses will offer their employees life insurance policies and they are taken out as a group policy with a ‘bulk-buy’ discount applied. Small and some medium-sized businesses will often not qualify for these group insurance policies and so relevant life insurance provides them with an opportunity to reward/benefit their employees.

It can also be advantageous for higher earners with a substantial pension as well because standard life insurance policies count towards their lifetime allowance, however, relevant life insurance policies are not included in lifetime allowance calculations.

Benefits of relevant life insurance

This type of life insurance is becoming increasingly popular, particularly as we see a rise in the number of contractors and small business owners, who would not benefit from a typical life insurance policy.

Businesses pay the premium, so the individuals do not have to, and the most important benefit of relevant life insurance is that they are classed as an admissible business expense and are, therefore, free of income tax and national insurance contributions for both the business and the policyholder, with no benefit-in-kind charges either.

Relevant life insurance policies must be set up with a trust this also means that the lump sum pay-out will be not be charged any inheritance either.

All in all making relevant life insurance a highly tax-efficient alternative to standard life insurance.

Drawbacks to relevant life insurance

There are a few limitations of relevant life insurance and these should be considered before starting a policy. They are for an employer to provide for an employee so that means that this type of insurance is not suitable for a sole trader or a shareholder of a company.

These policies are also only available for individuals; joint life insurance policies are not allowed as it is a perk for an individual employee of that firm. If that employee changed jobs, they would no longer benefit from this cover.

As with any life insurance policy the cost will vary depending on age, health, lifestyle etc of the policyholder.

Relevant life insurance experts

Finding a life insurance plan can be time-consuming and tricky to figure out how much cover your employee needs as well as which type of life insurance cover would be best. Active has a team of life insurance specialists who work daily with business director clients who want to provide their employees with a motivating benefit. By using one of Active’s experienced life insurance advisers, who specialises in relevant life insurance, you can feel confident that you are getting the right advice.

Active will take time to listen to your personal circumstances and how much you can afford to pay as well as the length of relevant life insurance that is required. You can focus on running your business.

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