Relevant Life Cover is a tax-efficient life insurance policy set up and paid for by an employer to provide a lump sum benefit to an employee’s family or beneficiaries if the employee passes away during the policy term. It is typically used by small businesses or directors of limited companies to offer life insurance as an employee benefit.

Relevant Life Cover is suitable for:

• Company directors who want personal life cover paid for by their business.

• Small business owners who want to provide life insurance benefits to their employees.

• High earners who want life cover without affecting their personal pension lifetime allowance.

Key benefits include:

• Tax efficiency: Premiums are usually considered a business expense, so they can be offset against corporation tax.

• No impact on personal tax: The benefit is not treated as a P11D benefit in kind.

• Flexibility: Policies can be tailored to individual employees.

• Peace of mind: Provides financial security to employees’ families in the event of their death.

Relevant Life Cover can only be taken out by an employer on behalf of an employee. This includes company directors who are also employees of their own limited company. Sole traders, partnerships, and LLP members are not eligible for this type of cover.

The main difference is that Relevant Life Cover is set up and paid for by the employer. Traditional life insurance is usually a personal policy paid for by the individual. Additionally, Relevant Life Cover offers tax advantages for both the employer and employee.

Yes! Relevant Life Cover premiums are typically:

• Tax-deductible for the business.

• Exempt from National Insurance contributions for both employer and employee.

• Paid without affecting the employee’s personal income tax or lifetime pension allowance.

Relevant Life Cover typically does not include critical illness protection. However, standalone critical illness policies can be arranged separately if needed.

The amount of cover depends on the employee’s salary and other benefits. Providers often allow up to 25 times the employee's annual remuneration (including salary, bonuses, and benefits in kind) as the sum assured.

If an employee leaves the company, the Relevant Life Cover policy can often be transferred to the individual. They can continue the policy as a personal plan by paying the premiums themselves.

Yes, Relevant Life Cover is regulated by the Financial Conduct Authority (FCA). It must also comply with HMRC guidelines to qualify for tax advantages.

Setting up Relevant Life Cover involves:

1. Choosing the level of cover for each employee.

2. Ensuring the policy is written into a discretionary trust to ensure tax efficiency.

3. Working with a specialist advisor to compare options and providers.

Contact us today to discuss your needs and find the right Relevant Life Cover solution for your business.