5th June 2019

So, you’ve heard of ‘life insurance’, but what is ‘relevant life insurance’? And, how does it differ from other cover? Well, that’s where we can help.

Read our overview below for a high-level explanation of what the cover is, who typically uses it, and how it may benefit you.

What is Relevant Life Insurance? And, How Much Does it Cost?

Relevant life insurance is a type of cover that provides a death-in-service benefit, available to employees, including salaried directors. The insurance will be set up and paid for by an employer, and as the policy is written in trust it will pay out a tax-free sum to a staff member’s beneficiaries should they pass away whilst employed.

The amount of cover and the premiums depend on the individual the policy covers. They will be assessed on elements such as current health, age, lifestyle, as well as dependent factors such as paying a mortgage or rent, personal bills, and earnings.

Most policies will either be fixed at a set, level amount, or will be linked with inflation so payouts reflect the cost of living, but premiums could rise. We would always recommend speaking to an expert, such as our team here at Pure Wealth Management, to ensure you take out a policy that is both relevant to your needs and affordable for your budget.

Who Should Take Out Relevant Life Insurance?

A relevant life insurance policy is an alternative to a group or company scheme. It might be suitable for small business owners who would like to offer their employees workplace benefits, but do not have the cash flow of a larger organisation or do not hit the minimum employee number threshold to qualify for group schemes.

A traditional group life scheme counts towards retirement savings, therefore relevant life insurance may also come in handy for high-earning directors or staff who have made use of their pension lifetime allowance or are approaching it.

Relevant life insurance can be used in-line with a death-in-service policy which offers a similar pay-out of up to four times an individual’s salary if they pass away. However, relevant life insurance provides more cover and may allow you to take charge of your cover should you leave the organisation that originally created it.

Relevant life insurance is not seen as a benefit-of-kind, and premiums are an expense and therefore can be used to reduce corporation tax bills.

What Are the Benefits of Relevant Life Insurance?

To summarise, the advantages of taking out such a policy are tenfold.

Benefits for Employees

For employees, relevant life insurance provides cover without the premiums. Although many people often take out their own personal, additional cover, it can provide a base-layer of cover, meaning reassurance and peace of mind that family will be taken care of should the worst happen.

Benefits for Businesses

For a company, relevant life insurance provides a tax-efficient way of providing a benefit to loyal staff, whilst providing an alternative to a group life assurance scheme and not needing to dip into personal income.

It can also be an attractive feature when recruiting and retaining staff as it shows the business invests in its staff, value their contributions, and genuinely care about their wider dependents.

Want to Find Out More?

Whether you’re an employer or an employee, if you would like to learn more about relevant life insurance, our friendly and knowledgeable team can help. Get in touch today to arrange your cover.