What's the Difference Between Personal Life Insurance and Relevant Life Cover?
Question asked by Robert Hamlin
I’m a company director looking to introduce Group Life Insurance. It will cover me and my staff. However, while my employees are paid a salary and I understand that they’ll be covered for a multiple of that salary, my salary is only minimal because I’m paid mostly in dividends. Can Death in Service Insurance cover dividends?
Group Life Insurance usually pays out a multiple of salary to an employee’s family should the worst happen. The most common multiples our clients choose are between 2 and 4 times salary.
However, as you’ve discovered, this can result in difficulties for company directors and other executives. This is because directors and executives often pay themselves a relatively small salary and top the rest of their income up with dividends.
Fortunately, as a company director seeking Death in Service Insurance, you have a couple of options.
The first is to continue with the Death in Service scheme for your employees but set up yourself and anyone else paid with dividends up in a separate membership category.
You’d be on a separate ‘level’ or ‘tier’ of cover compared to your staff paid a PAYE salary. On this tier of cover, the insurer would take both salary and dividends into account as total pay.
However, not all insurers offer this facility or will even consider covering dividends at all. You may therefore find that the policy that’s best for your staff isn’t the best for you.
Your other option is to set up Group Life Assurance for your staff and purchase entirely separate Life Insurance for directors: Relevant Life Insurance.
Relevant Life Insurance:
The biggest difference between the two options is how the insurer underwrites them. If you are below the the Group Life Insurance scheme’s free cover limit the insurer requires no medical underwriting. However, with a Relevant Life Policy you’ll be required to complete a medical declaration regardless of the level of cover you choose.
For help and advice finding the most appropriate cover for your circumstances, please do not hesitate to pop us a call on 02084327333.