Relevant Life Insurance

Relevant Life Cover is a tax-efficient way of providing Life Insurance for company directors or single employees. If the individual passes away, the policy pays out a tax-free cash lump sum death benefit to financially support their loved ones.

• The premiums are paid for by the company and are typically an allowable business expense.
• Savings on a Relevant Life Insurance policy compared to a personal policy can be almost 50% thanks to a variety of HMRC-approved tax reliefs available.

Can I Get Relevant Life Insurance?

Relevant Life Insurance 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.

Who Can Benefit from Relevant Life Cover?

Relevant life insurance is designed to provide cost-effective life cover for:

• Company directors / contractors working through their own limited companies
• Small businesses who want to provide a level of company paid life cover whether for an employee or director but do not have enough eligible employees to qualify for a group Death in Service scheme.
• Higher-earning employees with substantial pension funds who do not want their Death in Service benefits to form part of their lifetime allowance.

Do I Need Relevant Life Insurance?

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, Relevant Life Cover is a tax-efficient way to purchase Life Insurance to protect your loved ones.

The main benefits of a Relevant Life policy are:

• It’s tax-efficient
• Premiums are paid for by the business
• Payouts are typically not included in total maximum pension lifetime benefit calculations
• The benefit is paid out tax-free thanks to the trust structure set up alongside the policy.

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:

How Much Does A Relevant Life Policy Cost?

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:

• Level of cover
  The more cover you require the higher the premium for the policy.
• Length of cover
  The longer the policy term the higher the risk of needing to claim and this is reflected in higher premiums.

Other personal factors that you have less control over which will still impact on the cost of your policy include:

• Your age
  The older we are, the greater the risk of passing away during the term of the policy
• Your current state of health
  Those with severe health conditions, especially those which might limit life expectancy, will typically pay more for Life Insurance to reflect the greater risk the insurer is taking on
• Your smoker status
  If you smoke, you’re at greater risk of developing a serious, fatal health condition and so insurers will charge more
• Lifestyle and hazardous activities
  Lifestyle habits, such as regularly drinking more alcohol than is recommended, or participating in hazardous activities, could result in an insurer increasing the cost of your cover
• Family history
  Has any of your immediate family ever suffered a serious and/or hereditary illness that may impact you? If so, you may pay more for life cover.

Relevant Life Insurance vs a Personal Policy: Tax Savings

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.

By opting for Relevant Life Insurance 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.

Can I include Critical Illness Insurance?

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.

How Is Relevant Life Insurance Taxed?

Below is a list of our current understanding of HMRC’s tax rules surrounding Relevant Life Insurance.

However, before applying for cover you should check with your accountant / your local inspectorate of taxes.

• Is not classed as a taxable benefit in kind for the receiving employees.
• Is treatable as a tax deductible expense for the providing organisation (providing the local inspector of taxes agrees with the providing organisation’s compliance with all relevant qualifying conditions).
• Is excluded from NI calculations both for the employer and employee.
• Avoids inheritance tax by being written into a company owned trust.

Is Relevant Life Cover a P11D / Benefit in Kind?

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.

Is It HMRC Approved?

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.

• The policy must be term life insurance with a maximum policy length of up to age 75.
• The policy must be a pure protection policy with no surrender value or investment element.
• The individual covered must be employed by the company taking out the policy and not be solely a shareholder. Sole traders or anyone self employed would not meet this criteria as there is no employer.
• Any benefit payment must be paid via a trust to an individual or nominated charity. The benefit is not for the use of the company and is intended for beneficiaries of the covered individual only.

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 help@drewberry.co.uk.

Michael Barrow
Independent Protection Expert at Drewberry

Compare Relevant Life Insurance Providers

Aegon

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’s Relevant Life policy, 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

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 Relevant Life Insurance 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.

Legal & General

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 Relevant Life policies 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

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

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

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.

Zurich

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.

Need Relevant Life Quotes And Advice?

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 experts are here to help provide you with the necessary information for you to make an informed decision.

Why Speak to Us?

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.

• There is no fee for our service
• We are independent and impartial
  Drewberry isn’t tied to any insurance company, so we can provide completely impartial advice to make sure you get the most appropriate policy based solely on your needs.
• We’ve got bargaining power on our side
  This allows us to negotiate better premiums for you than you going direct yourself.
• You’ll speak to a dedicated expert from start to finish
  You will speak to a named expert with a direct telephone and email. No more automated machines and no more being sent from pillar to post – you’ll have someone to speak to who knows you.
• Benefit from our 5-star service
  We pride ourselves on providing a 5-star service, as can be seen from our 2252 and growing independent client reviews rating us at 4.92 / 5.
• Benefit from the protection of regulated advice
  You are protected. Where we provide a regulated advice service we are responsible for the policy we set-up for you. Doing it yourself or going direct to an insurer won’t provide this protection, so you won’t benefit from these securities.
• Claims support when you need it the most
  You have support should you need to make a claim. The most important thing when it comes to insurance is that claims are paid and quickly. We are here to support you during the claims process and make sure it’s as smooth and stress free as possible.

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 help@drewberry.co.uk.

Tom Conner
Director at Drewberry