Relevant Life Insurance

Key Benefits of Relevant Life Policies

Significant Tax Advantages

Relevant life insurance is structured to be extremely tax-efficient. Premiums are typically treated as an allowable business expense, reducing corporation tax liability for the company. Unlike most employee benefits, relevant life cover is not considered a ‘benefit in kind’, so there’s no additional income tax or National Insurance for the employee. Furthermore, payouts are usually free from inheritance tax, as the proceeds are paid into a discretionary trust separate from the individual’s estate.

Ideal for Small Businesses and Directors

Relevant life policies are perfect for small businesses, contractors, and directors who want to provide life cover for themselves or key employees but don’t qualify for a group life scheme. This makes it an appealing reward and retention benefit to companies that wish to recruit and retain their top talent, as well as show a high level of duty of care.

Flexible and Portable Cover

The policy can be tailored to cover directors, salaried employees and nominated staff. If the insured leaves the business, the policy can often be transferred, allowing the individual to continue the cover personally (though tax benefits may change).

How Does Relevant Life Insurance Work?

• The company takes out a policy on the life of a director or key employee.
• The business pays the premiums, which are usually tax-deductible.
• In the event of death or terminal illness during the policy term, a tax-free lump sum is paid to the employee’s beneficiaries via a trust.
• The level of cover can be set as a fixed lump sum or as a multiple of salary, and can be linked to inflation to maintain value over time.

How Does Relevant Life Insurance Work?

Some providers allow you to take critical illness cover in addition to life assurance. This pays out when the insured individual is a victim of a qualifying critical illness, examples such as cancer, heart attack or stroke Make sure to check your policy documents before any Critical illness cover is purchased, to ensure you are happy with their definitions of a critical illness.

Once the critical illness has been confirmed a lump sum can be paid. Such funds can be crucial to the business at a time of great stress, giving the business financial stability and time for the key person to recuperate. Critical illness cover may be purchased as a policy on its own or in combination with life cover to give comprehensive cover.

Who Is Eligible for Relevant Life Cover?

Relevant life insurance is available to businesses with an employer/employee relationship. It covers directors, salaried employees, and nominated staff members. However, it is not available for sole traders, equity partners, or members of a Limited Liability Partnership without an employer /employee relationship.

Why Choose Relevant Life Insurance?

• Tax-Efficient: Premiums are usually fully deductible, and benefits are paid tax-free.
• Flexible: Suitable for single directors, small business owners, and companies too small for group schemes.
• Employee Benefit: Helps attract, retain, and reward key staff.
• Peace of Mind: Ensures financial protection for families and dependents.

Get Expert Advice on Relevant Life Insurance

Looking to protect your business and employees with a tax-efficient life cover solution? At Howard Wright, our team of Chartered Financial Planners will help you assess your needs, compare providers, and put the right Relevant Life policy in place, with ongoing support as your business evolves.

Don’t leave your future to chance. Call us on 0345 688 4939 or complete our Smart Enquiry Form, to find out how we can help protect what matters most. We’ll give you clear, expert advice and the peace of mind you deserve, without the complexity.

Disclaimer: This article contains information from sources believed to be reliable but no guarantee, warranty, or representation, express or implied, is given as to its accuracy or completeness. Howard Wright Ltd does not undertake any obligation to update or revise any future statements. Past performance is not a reliable indicator of future results. Investments can go down as well as up and actual results could differ materially from those anticipated. This article is for information purposes only and has no regard to the specific investment objectives, financial situation or particular needs of any person as such, the information contained in this article is not intended to constitute, and should not be construed as, investment or financial advice. Appropriate personalised advice should be taken before entering into any transactions. No responsibility can be accepted for any loss arising from action taken or refrained from based on this publication. Howard Wright Ltd is Authorised and regulated by the Financial Conduct Authority.