What Is Relevant Life Insurance and Should You Get It?
Relevant life insurance provides a sense of security for both business owners and their staff. For businesses it is a cost effective insurance policy that offers protection to employees and their loved ones in the event of them dying or being diagnosed with a terminal illness. Here is an overview of relevant life insurance to help you decide whether you should have it.
What is relevant life insurance?
Relevant life insurance allows limited companies to provide a death-in-service benefit to their employees. A death-in-service benefit provides staff members who are signed up to the policy with a one-off, tax-free lump sum payment usually around 2-4 times their annual salary. Relevant life insurance is popular with limited companies since they provide an excellent source of corporation tax savings. One important factor of relevant life insurance is that the policy cannot be indexed linked.
This is a more cost effective option compared to group life schemes which are often out of the budget range for smaller businesses. A group life scheme is an insurance scheme that also provides a tax-free lump sum, and is typically included as part of an employee benefit package.
A relevant life insurance scheme provides the same benefit by paying out a one-off, tax free lump sum to an employee when they are diagnosed with a terminal illness, or to their loved ones should they die.
How does relevant life insurance work?
A relevant life insurance policy is held for and paid by the limited company ensuring the life of an employee is covered to provide benefits to the dependents in a result of the employees’ death. Relevant life insurance is available to all salaried employees (including directors) should the company as the policy holder decide to offer it to the employee working in the business. If a salaried employee signs up to a relevant life insurance policy provided by the business and remains working there for as long as it is provided, the business will continue paying the premiums.
To determine how much cover is required, each individual applicant will have their age, lifestyle and general health assessed. Other important areas of consideration include salary income, mortgage costs and other regular outgoing bills and financial commitments. The benefit is set by the company at a level they decide.
Should an insured person be diagnosed with a terminal illness, or die while working for the business, a pay-out will be made to them or their loved ones.
This is a tax-efficient policy for the employer as relevant life insurance counts as a tax deductible business expense. The employee and his loved ones will also be exempt from paying any income or inheritance tax.
While a traditional death-in-service policy will provide between 2-4 times the annual salary amount, relevant life insurance can typically offer more.
Employees who leave a business providing relevant life insurance will usually lose this perk. However, they may be able to take over the policy to start paying their own premiums. ds
Who benefits from relevant life insurance?
Relevant life insurance benefits both employer and staff members. We explain the difference in these benefits below.
Employer benefits
Relevant life insurance is a great staff benefit that enables smaller businesses to attract and retain high quality staff. It demonstrates that as an employer they take the financial security of their staff and families seriously by supplying an attractive benefit that is also tax efficient.
Relevant life insurance provides cost effective cover for small businesses, as the expenditure can be diverted towards their business rather than their personal income. At the same time, it offers protection for the families of long-term employees. Not only is it cheaper than a group life scheme but the policy can be treated as an expense.
Staff benefits
Life insurance isn’t affordable for everyone, and relevant life insurance provides it to employees who do not have to pay anything towards it. The level of cover provided may vary, so they may still need to seek out their own private policy.
With group life schemes counting towards the annual pension lifetime allowance, high salary earners can also benefit from relevant life insurance schemes. This means pay-outs could produce a high tax bill when it comes to accessing their pension. Relevant life insurance cover helps them prevent this, as it does not count towards the pension’s allowance.
Regardless of any personal policies employees may be paying for, this provides a further means of ensuring their family and loved ones are taken care of in the long-term.
Are you considering relevant life insurance?
If you are thinking about taking out relevant life insurance, it is recommended to talk to a financial adviser for guidance on finding the right policy for your personal situation. If you enjoyed reading our article we offer high-quality financial advice for relevant life insurance out of Colchester, Essex. You can get in contact with us today by calling 033 3303 4230 or e-mail [email protected].
FINANCIAL PROTECTION POLICIES TYPICALLY HAVE NO CASH IN VALUE AT ANY TIME AND COVER WILL CEASE AT THE END OF THE TERM. IF PREMIUMS STOP, THEN COVER WILL LAPSE.
Relevant life insurance provides a sense of security for both business owners and their staff. For businesses it is a cost effective insurance policy that offers protection to employees and their loved ones in the event of them dying or being diagnosed with a terminal illness. Here is an overview of relevant life insurance to help you decide whether you should have it.
What is relevant life insurance?
Relevant life insurance allows limited companies to provide a death-in-service benefit to their employees. A death-in-service benefit provides staff members who are signed up to the policy with a one-off, tax-free lump sum payment usually around 2-4 times their annual salary. Relevant life insurance is popular with limited companies since they provide an excellent source of corporation tax savings. One important factor of relevant life insurance is that the policy cannot be indexed linked.
This is a more cost effective option compared to group life schemes which are often out of the budget range for smaller businesses. A group life scheme is an insurance scheme that also provides a tax-free lump sum, and is typically included as part of an employee benefit package.
A relevant life insurance scheme provides the same benefit by paying out a one-off, tax free lump sum to an employee when they are diagnosed with a terminal illness, or to their loved ones should they die.
How does relevant life insurance work?
A relevant life insurance policy is held for and paid by the limited company ensuring the life of an employee is covered to provide benefits to the dependents in a result of the employees’ death. Relevant life insurance is available to all salaried employees (including directors) should the company as the policy holder decide to offer it to the employee working in the business. If a salaried employee signs up to a relevant life insurance policy provided by the business and remains working there for as long as it is provided, the business will continue paying the premiums.
To determine how much cover is required, each individual applicant will have their age, lifestyle and general health assessed. Other important areas of consideration include salary income, mortgage costs and other regular outgoing bills and financial commitments. The benefit is set by the company at a level they decide.
Should an insured person be diagnosed with a terminal illness, or die while working for the business, a pay-out will be made to them or their loved ones.
This is a tax-efficient policy for the employer as relevant life insurance counts as a tax deductible business expense. The employee and his loved ones will also be exempt from paying any income or inheritance tax.
While a traditional death-in-service policy will provide between 2-4 times the annual salary amount, relevant life insurance can typically offer more.
Employees who leave a business providing relevant life insurance will usually lose this perk. However, they may be able to take over the policy to start paying their own premiums. ds
Who benefits from relevant life insurance?
Relevant life insurance benefits both employer and staff members. We explain the difference in these benefits below.
Employer benefits
Relevant life insurance is a great staff benefit that enables smaller businesses to attract and retain high quality staff. It demonstrates that as an employer they take the financial security of their staff and families seriously by supplying an attractive benefit that is also tax efficient.
Relevant life insurance provides cost effective cover for small businesses, as the expenditure can be diverted towards their business rather than their personal income. At the same time, it offers protection for the families of long-term employees. Not only is it cheaper than a group life scheme but the policy can be treated as an expense.
Staff benefits
Life insurance isn’t affordable for everyone, and relevant life insurance provides it to employees who do not have to pay anything towards it. The level of cover provided may vary, so they may still need to seek out their own private policy.
With group life schemes counting towards the annual pension lifetime allowance, high salary earners can also benefit from relevant life insurance schemes. This means pay-outs could produce a high tax bill when it comes to accessing their pension. Relevant life insurance cover helps them prevent this, as it does not count towards the pension’s allowance.
Regardless of any personal policies employees may be paying for, this provides a further means of ensuring their family and loved ones are taken care of in the long-term.
Are you considering relevant life insurance?
If you are thinking about taking out relevant life insurance, it is recommended to talk to a financial adviser for guidance on finding the right policy for your personal situation. If you enjoyed reading our article we offer high-quality financial advice for relevant life insurance out of Colchester, Essex. You can get in contact with us today by calling 033 3303 4230 or e-mail [email protected].
FINANCIAL PROTECTION POLICIES TYPICALLY HAVE NO CASH IN VALUE AT ANY TIME AND COVER WILL CEASE AT THE END OF THE TERM. IF PREMIUMS STOP, THEN COVER WILL LAPSE.
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