In today’s blog we take a closer look at Relevant Life Cover. A Relevant Life Plan is a life insurance policy that is paid for by a business to cover Directors or employees. If the insured person dies, their chosen beneficiaries receive the life insurance money. The business cannot benefit from the life insurance.
This type of cover is a form of death in service benefit that small businesses can access.
Many larger businesses have a scheme that covers all staff as a group – known as a group life insurance scheme, but these have a minimum number of employees and some micro & small businesses do not have enough employees to put a group scheme in place.
For small businesses who employ up to 5 people, Relevant Life Cover is a great benefit to offer employees and it can help to recruit and retain staff.
To be eligible for Relevant Life Cover the person insured must be an employee of the business. This can include employed Directors.
Relevant Life Cover can be tax efficient for the following reasons:
- It is usually treated as an allowable business expense that can offset against corporation tax.
- The premiums are not normally treated as a benefit in kind so are not subject to income tax.
- Premiums paid by the employer do not usually attract National Insurance contributions.
- The premiums will not form part of the employee’s pension annual allowance meaning the employee is still able to make full use of their annual allowance to make contributions to a registered pension scheme.
We always recommend that your accountant is part of the advice process. We can work closely with them to ensure you understand the tax position of Relevant Life Cover.
If an insured employee dies, the proceeds of the life insurance are paid to their chosen beneficiary free of tax. This is because the policy is written in an appropriate trust.
Another benefit for the employee is that if they leave the business, they can chose to take their Relevant Life Cover with them. Their new employer can take on the premium. Or it can be converted to personal life insurance where the employee takes on the premium themselves. This could be important if the employee’s health has changed.
Taking professional advice is crucial for a business to ensure they have appropriate cover in place.
For more information on this valuable protection plan and for advice on all areas of business protection, please contact us on 01455 63 61 63. https://onerooffinancial.co.uk/contact/
Blog written: 13/11/2024
The information contained within this blog was correct at the time of publication (13/11/2024), and is subject to change.
