Relevant Life Insurance: The Tax-Efficient Way To Protect Your Family.

Nothing is more frustrating than seeing your hard-earned money handed over to the taxman. When you’ve worked tirelessly to save, invest and collect valuable assets, you want to protect them from unexpected events. There are several individual insurances out there, but relevant life insurance is the only policy that protects your family and has generous tax advantages.

Acting as a type of ‘death in service’ policy, relevant life insurance is a tax-efficient way for companies to arrange life insurance for directors and employees. This means any payouts are financed by the company and seen as a pre-tax trading expense. Written as a simple Trust document, relevant life policies are a type of life insurance exempt from income tax, inheritance tax, capital gains tax and National Insurance fees.

This type of cover can be applied to all colleagues, from interns to CEOs and Directors, allowing companies to protect their income and benefits, as well as valuable income for their families. It also costs 30-40% less than arranging individual life policies. For example, £1m of life cover can cost as little as £42pm for a 36-year-old man in good health or £70 pm for a 42-year-old*.

As a result, relevant life insurance is often cheaper than paying premiums from salaries or dividends. It also costs a lot less than servicing, insuring and taxing a single supercar for the year but brings you complete peace of mind that your investments and your family’s future are secure.

The Benefits of Relevant Life Insurance.

• Pays dependents or families of employees and directors a lump sum during the policy term
• Paid for by the Company
• Up to 25x salary is covered where possible
• It is seen as a business expense and, therefore, tax-efficient
• Not considered a P11D benefit
• Treated as a protected Trust avoiding income tax, inheritance tax, capital gains tax and National Insurance
• Any payouts don’t contribute to the covered person’s pension or annual premiums allowance

Setting up Relevant Life Cover.

At Elevate, we’ll discuss your requirements and research suitable options. Our in-house team can arrange one of these tax-efficient policies from our panel of insurers, including AIG, Aviva, and Zurich, and oversee coverage quickly from £250,000 to £ 5 million, but larger amounts can also be accommodated. Relevant Life policies are portable, so a new employer can pay the premiums or convert them into a personal policy, although tax benefits might be lost.

Our service is free, and we want to help protect your family’s future. Get in touch whilst this tax break still exists to put your Relevant Life cover in place.

All you need to know about Relevant Life Insurance.

What is Covered?

Relevant life cover pays out a lump sum if the life being covered dies during the policy term. Significant illness cover can be added, and this pays out a lump sum if the life covered either dies during the policy term or survives but suffers from a defined significant illness such as cancer or a stroke. Policies often include a terminal illness benefit, which pays out if, during the policy term, the life covered is diagnosed with a terminal illness that meets the policy definition.

Who is eligible?

Relevant life insurance is aimed towards companies to help protect themselves, their employees and their families. You can set up relevant life plans for UK residents who are employees, directors, or salaried partners of a ‘UK resident company’ — as well as limited companies, limited liability partnerships (LLP), or traditional English partnerships.

How is Relevant Life Insurance set up?

Setting up relevant life cover is a simple process which we can guide you through. It involves a single life insurance policy for each employee at all levels, naming them as the person being covered. The policy is written into a Discretionary Trust to specify any policy payouts that benefit the insured person’s family and financial dependents. Relevant life plans end when the employee is 75, with the company paying the policy premiums as long as the covered persons are employed with them.

What are the maximum sums insured?

The maximum amount of cover available will usually depend on the employee’s age and level of remuneration. It may also depend on any other life cover that is in place for the employee. Remuneration includes salary, bonuses, benefits in kind and regular dividends from shares in the employer’s company or a company within the employer’s group of companies. The multiples of remuneration are typically:

• 18–29 years – up to 25 x remuneration
• 30–39 years – up to 25 x remuneration
• 40–49 years – up to 25 x remuneration
• 50–59 years – up to 20 x remuneration
• 60–73 years – up to 15 x remuneration

Why is Relevant Life Tax-Efficient?

Relevant life is tax-efficient because premiums are paid for by the Company as a type of ‘death in service cover’ and treated as a trading expense, therefore pre-25% corporation tax. The taxman doesn’t treat premiums paid by the employer as a P11D benefit, nor does the employee or employer pay National Insurance on the premiums. Any pay-out from the policy is usually exempt from income tax, inheritance tax or capital gains tax as the policy is written into a simple Discretionary Trust. As a result, this type of life insurance is much cheaper than paying premiums from after-tax earnings, salary or dividends.

Is Relevant Life Insurance Flexible?

Yes, relevant life insurance policies are portable and have flexibility if a new employer pays the premiums. Alternatively, relevant life policies can be converted into an individual life insurance policy.