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Relevant Life Insurance could save Company Directors 50% on premiums!

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Why have so few Company Directors heard of Relevant Life Insurance when they could save 50% on their monthly premiums due to the associated tax-efficiencies?

Although a relevant life policy can result in significant savings for Company Directors looking to take out life insurance, research from Legal & General has found that 63% of directors had never heard of a relevant life plan! (1) We’re hoping to change that.

What is Relevant Life Insurance?

In terms of its function a relevant life plan is just like any other life insurance policy. The plan runs for a length of time, say until retirement age, and if you pass away during that time the insurer will pay out a lump-sum amount. Your family would then be able to use that money to help with the mortgage, childcare and funeral costs, for example.

The main difference between relevant life insurance and personal life insurance is that the relevant life plan is owned and paid for by your business.

It is essentially a death-in-service scheme but for just one person. A specialist ‘relevant life trust’ is also needed, which has the same function as a normal discretionary trust.

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How can I make such big savings on my life insurance?

Tax deductible premiums…

The premiums paid by the business are usually fully tax-deductible as a trading expense, provided that the local inspector of taxes accepts that the policy premiums are ‘wholly and exclusively for the purpose of trade’.

Relevant life cover is not a P11D benefit…

Secondly, the premiums paid by the business on your behalf are not treated as a P11D benefit and will therefore not have an impact on the amount of personal income tax you pay. Additionally, there are no National Insurance implications for either the employee or the employer.

The benefit paid out by the insurer would be paid into a relevant life trust and would fall outside of your personal estate upon death, meaning that no inheritance tax would be payable on the benefit received by your family. As the plan is ‘non-registered’ with HMRC the lump-sum would also not form part of your lifetime pensions allowance.

 

Relevant life cover savings that can be made…

Paying £100 per month premium, for a Director (with a 40% marginal rate of income tax) Relevant life cover is 49% cheaper than a personal life insurance plan.

Personal Life Cover
Relevant Life Cover
Cost to Individual
Monthly Premium
£100.00
£0.00
Employee NI Contribution
£3.45
£0.00
Income Tax
£68.97
£0.00
Cost to Business
Premium
£0.00
£100.00
Employer NI Contributions
£23.79
£0.00
Gross Cost
£196.21
£100.000
Corporation Tax
-£37.28
-£19.00
Total Cost
£158.93
£81.00
Total Savings

49.03%

To see what you could save try our Relevant Life Insurance calculator below. For accurate savings make sure the relevant tax rates are correct for your circumstances, complete your details and see how much you could save.

Relevant Life Insurance Calculator

Calculate the tax savings you can make by taking out a company paid Relevant Life Insurance policy instead of a personal Life Insurance policy.

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Relevant life insurance restrictions

With a relevant life policy there are a number of important restrictions to adhere to, which include the following:

  • The policy must only cover death and not any disability or critical illness benefit. Premium payment protection is also not allowable;
  • It is usually only possible to cover up to 25 times your total remuneration (this can include your salary, dividends and P11D benefits);
  • The plan can only run to a maximum age of 75 years old (this is because it’s meant to align with the maximum termination age for a group life assurance scheme);
  • The plan must pay a lump-sum amount rather than an income. It is possible to take out a policy where the level of cover remains fixed (level term) or declines over time (decreasing term);
  • The plan must be payable to an individual and not to a company. A Relevant Life Trust must be used to ensure this requirement is achieved;
  • The policy must also not have any surrender value or be set-up for the purpose of tax avoidance.

If any of these criteria are not met then the advantageous tax status of these policies may be lost.

Taking out relevant life cover?

Nearly all the major insurers now offer Relevant Life Insurance. As independent insurance advisers we have access to all of these products and can therefore help you obtain the most competitive premiums.

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 2335 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.

Notes

(1) http://www.legalandgeneral.com/library/protection/sales-aid/W13220.pdf

(2) Please note that none of the information contained here should be treated as tax advice. For tax advice please consult a certified accountant.

Extremely satisfied with the help and advice from Drew, since the beginning him understood what I was looking for and have the patience to help me out with all my questions and doubts. Didn’t tried to be push or annoying calling me all the time like so many did before. At the end we find the perfect medical policy for me and my daughter that covers everything that we need. I more than recommend them and if in the future I need something else for sure I will contact them again. Giving only 5 stars because I can’t give 6!!!!

Natasha Caversan Mucci
07/06/2019
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