A bit morbid we know, but this tool works out the risk of you passing away based on ONS Life Expectancy Data
Relevant Life Insurance, or Relevant Life Protection (RLP) is a suitable option for many company directors who need Life Insurance. In fact, it’s designed specifically for business owners, directors, or single employees.
The key thing to know about Relevant Life Cover is that it needs to be paid for by a limited company. When set up properly, it’s a highly tax-efficient form of protection.
Don’t have time to read the below, but want a quick, expert overview of Relevant Life Insurance? Our very own Ben Brooks, has given us the rundown on the policy and how it works. Just press play. 👇
At its core, Relevant Life Insurance works just like any other form of life protection. If the insured person dies, the policy pays out a tax-free lump sum. The funds are then paid to the deceased’s loved ones.
However, there are some differences between personal life insurance and relevant life cover. The key areas where Relevant Life Cover works differently include:
We’ll cover the tax implications in more detail later on. But ultimately, Relevant Life Protection is a recommended alternative for business owners who aren’t eligible for Group Life Insurance. It’s best suited to business owners and contractors working through their own limited company or small business.
Most people live with debts and expenses in one form or another. This could be supporting a family, a mortgage, or any other kind of liability or loan.
How would your loved ones cope if you were to suddenly pass away? If you have financial dependents, how would they be cared for? And how would a partner cope without your income?
If the answer is that it’d be a struggle, taking out a Relevant Life policy is a very important safeguard. And as a business owner, you’re in the unique position of being able to save a huge amount of tax on such a policy.
Rather than taking out personal Life Insurance in the normal way, you take out a policy through your company. This means your business pays for the premiums, rather than you paying personally.
However, unlike some other forms of company-paid Business Protection, a Relevant Life policy doesn’t benefit your business. For example, Keyman Insurance, Business Loan Protection, and Shareholder Protection all have a focus on business continuity.
If you pass away with a Relevant Life plan, it provides your loved ones with the financial security they’ll need in your absence. It’s a very tax-efficient benefit for company owners.
When setting up a policy, there are few things to consider to make sure it meets your needs.
Like other life protection plans, Relevant Life Cover not only pays out on death but also if you become terminally ill. Most insurers define terminal illness as an incurable condition, where you have 12 or fewer months left to live.
It’s important to remember that Critical Illness Cover cannot be included. While HMRC has approved the tax efficiencies on Life Insurance for company owners, they haven’t approved the same setup for Critical Illness Cover.
As you may already know, level cover remains the same throughout the term of the policy. But index-linked cover rises with the annual rate of inflation. This helps to prevent your benefit from losing value in real-terms thanks to inflation.
Increasing cover may suit you if your business costs keep pace with inflation. As your fees and revenue rises, your life benefit keeps up, too.
If you want index-linked cover, all providers will increase your premiums to account for the increase.
However, it ensures your level of benefit is not eroded by inflation and maintains its buying power over time.
Independent Protection Advisor
Another factor to consider is what kind of premiums your company will pay for your cover. Guaranteed premiums tend to cost more at first. But, they remain fixed over the life of the policy and won’t rise later on.
On the other hand, reviewable premiums can be more cost-effective at first. But, the insurer will review the premiums every 5 years. They’ll consider lots of factors, such as:
After the review, the provider might increase or decrease the premiums as they see fit. The fact is that although reviewable premiums often start cheaper; they tend to cost more in the long run.
As mentioned, Relevant Life plans are a good alternative to group life schemes. They provide a form of personal Life Insurance that benefits your loved ones, but it’s paid for by your company.
When it comes to group schemes, many providers will only offer cover to a minimum of 10 members. There are insurers that will provide schemes for groups of 3, but it’s a narrow range of options.
A limited company can take out Relevant Life Cover for individual employees. Doing so provides very tax-efficient life cover, which may be a great option for:
You must meet some eligibility criteria to make sure the policy—and all its tax savings—are valid. This includes things like having the right employment status.
If you’re not eligible, there are other ways to provide life cover through your company. As we mentioned before, there are other forms of Life Insurance that also act as Business Protection. Shareholder Protection or Key Person Protection might end up being more suitable for you.
It’s important to note however, the Labour party has announced that if they were to be elected, the allowance may be reintroduced in the future. If this occurs, we will update our records to reflect any changes. The information on this page is based on the LTA pre 6 April 2023.
If you’re relatively healthy, the chances are you expect to live a long life. No-one likes thinking about making preparations for their passing, so it’s easy to keep putting it off.
As sad as it is to consider our mortality, it’s important to be prepared if the worst should happen. Too often, the alternative means leaving your loved ones without the right provisions.
We’ve looked into life expectancy data from the Office of National Statistics (ONS). According to them, the chances of a healthy man passing away in the next 10 years—based on age—are as follows:
Risk Of Death In 10 Years
Risk Of Death
30 Years Old
1 in 112
40 Years Old
1 in 53
50 Years Old
1 in 23
We realise it’s a bit on the morbid side, but we’ve included our life expectancy calculator below. This is based on the same life expectancy data from the ONS, so you can think about what kind of cover you might need.
Taking out a Relevant Life policy is one thing, making sure you have enough cover to ensure your loved ones are financially secure is another.
As the premiums are paid by your company, the amount of cover will be a multiple of your income. This includes your salary, of course, but also any bonuses, dividends, and the cash value of any benefits-in-kind.
Before taking out protection, think about what your loved ones would need financially to cover things such as:
The maximum amount of cover you can have depends on your age and the insurance provider. As a general rule of thumb, though, most providers let you cover up to 15 times your total earnings.
When Death in Service benefits are offered as an employee benefit, 4 x salary is a pretty typical amount. But with Relevant Life Cover, you can choose the amount insured. So, it’s important to work out how much your loved ones and financial dependents might need if you pass away.
Because Relevant Life Insurance is linked to your company, it’s normally expected to last until you retire.
You’ll need to decide on an expiry age when setting up your policy, usually up to 75 years old. So, you’ll want to think about retirement planning and when you expect to stop working.
The cost of Relevant Life Cover is based on the same factors as personal Life Insurance. You can control some of these factors, like your amount of cover, policy term, and insurance provider. There are other factors that are outside of your control, though, like your age and medical history.
We’ve got some quotes to give you an idea of how much a Relevant Life Policy might cost. These take into account some of the factors from above.
The insurance provider you choose will have an impact on the cost of your premiums. This is because all insurers have different ways of calculating risk—and therefore, costs.
Below, you’ll see an example of quotes from 2 different providers. The figures are based on:
£24.21 per month
£26.45 per month
Your chosen amount of cover, or sum assured, is a big factor when it comes to cost. You need to think about how much you need to leave for your loved ones if you’re not around anymore.
We’ve got some quotes for the same 35-year-old director on the same basis as before. This time, the figures show the monthly premium for 2 benefit amounts from Liverpool Victoria (LV).
Level Of Cover
With Relevant Life Insurance, you can choose your policy term. As we mentioned before, you’ll probably want the cover to stay in place until your planned retirement age.
We’ve run quotes for our same 35-year-old company director, but with different policy terms. These figures are from AIG.
£17.57 per month
£26.15 per month
Another key factor when it comes to cost is how old you are. With insurance, it’s always cheaper if you take out cover at a younger age.
To illustrate this, we’ve got figures for a healthy individual taking out £500,000 of level cover for 20 years. These quotes are from Royal London.
Impact of Age on Premiums
35 Years Old
45 Years Old
55 Years Old
When you apply for an insurance policy, providers assess the risk of providing that cover. If you have any existing health conditions, it could impact your amount of cover or the terms of your policy.
With Life Insurance, a pre-existing condition might cause an increase in your policy premiums. This could be because of your body mass index (BMI), a previous illness, or a chronic condition.
Each provider differs, though, so what one sees as high risk another might not. This is why it’s so important to compare providers when doing your research.
It’s a fact that smoking increases the risks and severity of lots of health issues. This is why most providers charge more for smokers compared with non-smokers. But, there are some providers who have a ‘neutral’ approach to smoking, so premiums won’t cost more.
To show how smoking can impact your premiums, here’s more comparison quotes. The figures are based on an otherwise healthy 35-year-old company director who wants £500,000 of level cover for 20 years.
Smoker VS Non-Smoker
£22.96 per month
£49.87 per month
☝️ 117% increase in monthly costs for smokers
If you’re looking into Relevant Life Insurance, you’re probably a company director. But the industry your role takes place in could impact your premiums depending on whether it’s high risk.
If you have a hands-on role in a high-risk industry, such as construction, this will be seen as higher risk than, say, a marketing consultant. Because of this higher risk, it’s likely you’ll pay higher premiums.
It’s not just your job role that providers will look at. They’ll also ask if you do any extreme sports or hazardous hobbies, because these would also classify you as a higher risk category. Hazardous activities might include:
Most online quote tools only show an initial premium, which doesn’t take into account any extra risk factors. So, the actual cost could grow later.
We can work with providers to negotiate the best price on your behalf if you feel you’re at a higher risk. Just pop us a call on 02084327333 or email email@example.com.
Independent Protection Expert
Remember, what we’ve provided here are just examples. Your actual costs will depend on your own circumstances. If you’re ready to search for quotes and apply, you can use our handy online quote tool.
Imagine you have a personal Life Insurance policy which costs you £100 a month. Before you receive the funds to pay this premium, you’ll pay income tax and National Insurance (NI) contributions on your earnings.
In real terms, this means a high-rate taxpayer needs to earn £196.21 before tax so that they can afford to pay a £100 Life Insurance premium.
But with Relevant Life Cover, your business pays for the premiums before HMRC can deduct any tax and National Insurance Contributions (NIC). As a result, a policy with exactly the same monthly premium could save you as much as 49% compared to a personal plan.
We’ve provided a breakdown of this below.
Personal Life Cover
Relevant Life Policy
Cost to Individual
Employee NI Contribution
Cost to Business
Employer NI Contributions
To find out how much you could save in tax, you can use our Relevant Life Tax Saving Calculator below. This will work out your exact savings based on your own premiums and earnings.
Relevant Life Protection benefits from the same tax savings as a group Death in Service benefit, which is one of the most tax-efficient forms of insurance. Both are considered very tax efficient benefit in terms of tax, NI, and corporation tax relief.
EXPERT TIP! 🤓
Before applying, you should speak with your accountant and your local inspectorate of taxes. First and foremost, in order to meet HMRC’s requirements, Relevant Life Cover must not be seen to be primarily for tax-avoidance.
Yes, when set up correctly, Relevant Life Insurance is typically:
A plan is also:
Most importantly, for Relevant Life to retain its tax efficiency, you must not use the benefit for business protection. There are other ways to protect your business which also provide life insurance. For example, Key Person Insurance or Business Loan Protection.
As long as the policy is structured correctly, HMRC does not consider it a P11D Benefit. This is the case even though the company owns and pays for the plan. The employee or company director also has no additional tax to pay from having the cover.
Yes, a Relevant Life plan trust is integral to the policy.
A trust ensures the death benefit bypasses both the business and the estate of the deceased. This avoids any nasty tax implications for either the company or the employee’s family.
No, it’s our understanding of current tax legislation that you cannot include Critical Illness Cover in your RLP plan.
Doing so negates the tax-efficient nature of the Relevant Life Cover. This is because HMRC hasn’t approved Critical Illness Cover as a tax-deductible business expense.
What you may be interested in is a policy known as Executive Income Protection. If you become too ill or injured to work, it kicks in after a set waiting period. The policy can then pay up to 80% of your total remuneration (i.e. salary and dividends).
Most providers offer the option to convert your RLP to a personal policy. This option can be used if your circumstances change. For instance, if you cease working under the company but wish to keep the life protection in place.
Usually there is a short form to complete and you must set up a new direct debit to pay the premiums.
Like a group scheme, the level of cover is generally defined as a multiple of your salary.
Although it can vary, most providers allow you to cover up to 15 times your total remuneration. This can include your salary, bonuses and dividend payments.
One of the stipulations of RLP is that it must be owned and paid for by the employer. As a sole trader has no separate legal entity, they’re not eligible.
There are multiple Relevant Life providers on the market. They’re all different, not only with their attitudes to risk but also with their unique policy offering and additional benefits.
Some insurers prioritise extra features and support services. Others might cover you for higher sums assured or multiples of earnings.
Some of the best Relevant Life Insurance providers include:
Here at Drewberry™ we work with the whole of the market. This means we’ll get quotes from all UK providers and negotiate for the most competitive premiums.
Your policy will perform its core function of paying out in the event of death or terminal illness. On top of that, and like most forms of group and individual protection, Relevant Life Cover comes with some extra features.
These are support services you can use to maintain your health, fitness and overall wellbeing. Some of the services can be shared with your family as well as helping to improve or maintain your own life.
For example, a typical additional benefits package might come with any of the following:
It’s important to compare the extra services carefully, so you can make the most out of any additional benefits.
Using an adviser offers you extra financial protection, because it’s classed as an advised sale. This means if the policy ends up not being suitable, you’re protected by the FCA.
To speak to a friendly member of our team, call us on 02084327333, or email firstname.lastname@example.org.
Independent Protection Expert
Setting up a Relevant Life Plan demands a lot of thought and consideration. There are many policy factors to decide, like tax implications and trust paperwork.
In our experience, company directors are never not busy. When you’re running your own business, it’s tricky to find time for much else.
This is where our expert financial advisors can help. We’ll listen carefully to understand your needs and arrange cover in the most cost effective way. And our protection consultants will make sure the policy is set up correctly to take advantage of the tax breaks.
We started Drewberry™ because we were tired of being treated like a number.
We all deserve a first class service when it comes to things as important as protecting our health and our finances. Below are just a few reasons why it makes sense to talk to us.
If you need help setting up Relevant Life Cover, give us a call us on 02084327333 or email email@example.com.