Relevant Life Insurance (RLP) is a tax-efficient way of providing Life Insurance for company directors or single employees. It is particularly popular with contractors who work through their own limited company.
If the individual passes away, the policy pays out a tax-free cash lump sum death benefit to financially support their loved ones.
Relevant Life Cover is often used by companies where a director is working through a limited company or by micro businesses which don’t have enough employees to qualify for Group Life Insurance.
As a micro business, if you want to give something back to your employees then Relevant Life Insurance is a great employee benefit to offer when there are not enough employees to qualify for a group scheme.
A Relevant life policy is designed to provide cost-effective life cover for:
RLP needs to be purchased through a limited company which means the tax relief is not available to sole traders.
The vast majority of people we help set-up Relevant Life Insurance are contractors.
Most contractors have their own limited company but tend to be the only employee other than their spouse. Too small for a group scheme they can take advantage of RLP to benefit from the same tax-efficiencies as a death in service scheme.
Our Relevant Life Insurance calculator is the only place you can get instant online quotes comparing the top UK insurers. Simply pop your details in below to get your quotes 😊
If you don’t have any debts or expenses to consider, you may not need a Relevant Life policy.
However, if you worry about your loved ones struggling financially should you die, it is a tax-efficient way to purchase Life Insurance to protect your loved ones.
The main benefits of RLP are:
Based on ONS life expectancy data, the chances of a healthy individual of various ages passing away in the next 10 years is as follows:
1 in 112
1 in 53
1 in 23
There are a number of factors that will determine the cost of Relevant Life Insurance. Some are key policy factors you can control, such as:
Other personal factors that you have less control over which will still impact on the cost of your policy include:
It is important to note firstly that in order to meet HMRC qualifying requirements, the purpose in providing Relevant Life Insurance must not be seen to be primarily as tax-avoidance.
Personal Life Cover
Relevant Life Cover
Cost to Individual
Employee NI Contribution
Cost to Business
Employer NI Contributions
By opting for a Relevant Life policy over Personal Life Cover you would make savings of 49.03%. That is a saving of £77.93 per month or £935.13 per year.
Where Relevant Life Insurance is designed to replicate Death In Service for a single employee one of the requirements to qualify for the preferable tax treatment is that it does not include Critical Illness Cover.
Many contractors who we help set-up their Relevant Life Policy end up choosing to take out Executive Income Protection instead of a Critical Illness Policy as not only does it provide a more comprehensive level of cover for their income, it can also be paid for by their business.
Below is a list of our current understanding of HMRC’s tax rules surrounding Relevant Life Cover.
However, before applying for cover you should check with your accountant / your local inspectorate of taxes.
No. So long as the policy is structured correctly, even though the company owns and pays for the policy it is not a P11D benefit in kind so there is no tax to pay by the employee / director.
There are a number of conditions that need to be be met in accordance with HMRC to ensure the policy benefits from the favourable tax position.
To ensure your Relevant Life policy is structured and set up correctly from the outset and doesn’t fall foul of any of HMRC’s rules please don’t hesitate to pop us a call on 02084327333 or email email@example.com.
Independent Protection Expert at Drewberry
A lot of people we speak to are often confused between Relevant Life Insurance and Keyman Insurance which is completely understandable.
The main difference is that Keyman Insurance is designed to protect the business where Relevant Life Insurance is designed to protect the loved ones of the person covered. Should the individual die the proceeds of a Keyman Insurance policy would be used for business continuity covering lost profits, recruitment fees and generally trying to maintain business as usual.
With a Relevant Life Policy the benefit would be paid to the loved ones of the deceased from the trust just in the same way as if it were a personal Life Insurance policy. There is no benefit paid to the business itself.
A relevant life policy can be set-up for anyone who is employed by a limited company however it is most popular with contractors and micro businesses who do not have enough employees to set-up group death in service.
Other use cases include high earning employees who do not want their company life insurance to form part of their lifetime allowance.
Relevant life cover is designed to mirror the tax position of a death in service scheme which means the premiums are tax-deductible and any benefit payable as a result of a claim is paid out tax-free.
Relevant life insurance and shareholder protection are two separate policies and should not be confused.
With Shareholder protection it is common to require a cross-option agreement and for premiums to be equalised which adds another layer of complexity. We would advise you speak to one of our experts to better understand the key differences and ensure you are taking out the most appropriate protection.
Should a claim arise RLP would pay out a cash lump sum to the beneficiaries of the deceased. Any benefit would be paid out tax-free via the relevant life insurance trust.
There are a number of standard conditions including:
This will differ across providers however as a rule of thumb you are likely to be able to cover up to 30 x annual salary to a maximum limit of £10 million.
Aegon, originally known as Scottish Equitable, has received 5 star Defaqto ratings for its service. Aegon has around 3.5 million customers in the UK alone and operations in more than 25 countries.
With Aegon you’ll have access to the Health & Wellbeing Service provided by Health Assured, putting you in touch with qualified and experienced counsellors at any time of day.
AIG is a US multinational insurance giant with more than 100 years of experience in the insurance industry. It provides its services in more than 80 countries worldwide.
AIG’s product can cover up to 35 times salary depending on an individual’s age. If the insured individual leaves the company covering them, they have the option to transfer the policy to a new employer or take on the policy individually.
In 2015, Legal & General won the ‘Life Insurance Provider of the year’ award from the Personal Touch Awards
Up to the age of 50, Legal and General offer cover of up to 25 times remuneration, with that cover decreasing to 20 and 15 times if the employee is over 50 and 60 years old, respectively. If the employee leaves the company, Legal & General also allow ownership of the policy to be transferred to the person’s new employer to continue their cover.
Liverpool Victoria is one of the largest providers of insurance products in the UK, with more than 5 million customers across the country.
LV offers a maximum level of cover up to £10 million with guaranteed premiums that will not change during the life of the policy. It also offers several helpful benefits to accompany policies, including legal advice and VAT and tax advice.
Royal London began as a friendly society in 1861, later changing to a mutual society in 1908. Today, Royal London is now the UK’s largest mutual life, pensions and investment company.
You can cover up to 30 times your salary with Royal London’s Relevant Life plan depending on your age. Every policy comes with Royal London’s Helping Hand service which the employee and their family can use. This is a package of benefits such as access to a face-to-face second medical option; access to bereavement counselling; and legal, career and medical helplines.
Scottish Widows is a highly praised provider of pension and insurance products across the UK with nearly 6 million customers.
Scottish Widows can cover employees for up to £25 million. It also offers optional increasing cover to ensure benefits keep up with inflation and if an employee leaves the company, you and the policy’s trustees can arrange to assign the policy to the employee under their own name.
Vitality entered the UK market in 2007 with a joint venture with PruHealth and PruProtect, part of the Prudential Group. It has since bought out Prudential and is now branded solely as Vitality.
Vitality’s unique proposition – under which you receive rewards and discounts for completing certain activity thresholds – is also available on its relevant Life Insurance policy. This means you can make premium savings on top of the tax savings you will make.
Zurich owns locations in more than 170 countries and provides insurance products and services on a global scale.
Zurich policies are portable, which means that employees leaving the company can take their Life Cover with them and have the policy continue under their own name. Zurich’s policies also typically cover a sum equal to multiple of the covered employee’s remuneration package, which can include both salary and dividends.
We are here to ensure you, your family and your business don’t miss out on financial security because appropriate insurances were not put in place.
Our Relevant Life Insurance cost calculator can provide you with instant online quotes which can be a great place to start however given how important it is to set-up the policy correctly to take advantage of the tax breaks it is often best to have one of our experts support you through the process.
We started Drewberry because we were tired of being treated like a number and not getting the service we all deserve 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.
It is very important to make sure your Relevant Life Insurance is set-up correctly to benefit from the tax savings available.
If you need any help please do not hesitate to pop us a call on 02084327333 or email us at firstname.lastname@example.org.
Director at Drewberry
Josh was brilliant, very quick process, simple, regular updates and reliable. Would highly recommend.