What Type of Life Insurance Can You Have Under a Relevant Life Policy?

I am a company director with a mortgage and family I want to cover with Life Insurance. I spoke to my accountant and he mentioned Relevant Life Cover. Is it possible to use this to protect these risks?

Question asked by Richard Fry

Relevant Life Insurance is most commonly Level Life Insurance, where the benefit remains fixed at a multiple of the insured individual’s remuneration over time.

This is because it’s designed to be similar to Group Life Insurance, where the payout also remains fixed over time. Contractors and directors working through their own limited companies frequently use Relevant Life Cover.

Businesses can also use this cover where there aren’t sufficient staff numbers for a Group Life scheme. Typically, you must have at least three to five staff to get a Group scheme off the ground.

However, while Relevant Life Insurance does provide a lump sum payout on your death for your family, and does so with very tax-efficient premiums, it’s not necessarily always the best option.

For example, it isn’t usually suitable to run alongside most mortgages, which are today usually repayment mortgages. This is opposed to personal Decreasing Term Life Insurance, which is designed to.

Decreasing Term Life Insurance falls over time alongside the mortgage, whereas Relevant Life Cover stays at a fixed sum. Cover that remains fixed over time tends to be more expensive due to the fact that the risk to the insurer remains the same even as we age.

It may therefore end up being more expensive, even with the premium discount from running the cover through your limited company, to insure your mortgage with Relevant Life Cover.

Help and Advice…

Whether you should chose Relevant Life Insurance or not depends on your circumstances.

To make sure you set it up correctly, speak to a financial adviser. One of the team at Drewberry would be happy to discuss this with you.

Don’t hesitate to pop us a call us on 02084327333 or email us at help@drewberry.co.uk and our expert advisers can talk you through the different options in more detail.

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