Protecting our loved ones is one of the main reasons we get up and go to work in the morning.
The challenge when you set up your own company is that you no longer qualify for any of the benefits that traditional employees enjoy.
Some of the most valuable benefits include private health insurance, paid sick leave and death benefits.
Fortunately, small limited companies can provide life cover for their key employees – and benefit from tax savings normally offered by larger firms via group life insurance schemes.
In this guide, we explore the concept of relevant life insurance – including some key facts, and a quote request form.
What exactly is Relevant Life Insurance?
Relevant Life Insurance ultimately does exactly what standard life insurance does, paying out a lump sum to your chosen beneficiaries if you die while the policy is in force.
The biggest difference between the two is that Relevant Life Insurance, unlike standard life insurance, is tax efficient and can be paid through your limited company, saving you money.
Five facts about Relevant Life Insurance
1. Relevant Life Insurance is taken out by the LTD company, not the individual
The limited company sets up a relevant life policy to cover a key employee, such as a director. The company pays the monthly premiums, rather than the employee.
2. It is not treated as a benefit-in-kind
If an employer provides an employee with a taxable benefit – such as a company car, the company pays 13.8% employers’ NICs on the benefit, and the individual pays income tax on the same amount.
Fortunately, Relevant Life Insurance is not treated as a benefit-in-kind; this means that neither the employee nor the company pays any additional tax on the value of the benefit.
3. The payout is free from income tax and, usually, inheritance tax
Relevant life insurance is a tax-efficient way to pay for life cover. It is also tax efficient if the worst happens, and a claim is made.
There are no income tax or inheritance tax liabilities (when placed into trust correctly), so the policy’s beneficiaries will receive the full payout if you die.
4. The policy is written under trust
At the outset, your policy will be written under trust. You nominate both trustees – usually the limited company itself, its director(s), and in some cases a professional person or organisation.
The trustees own the policy, and if you die, they will be in charge of distributing the lump sum. They can use their discretion but must abide by the terms and conditions they sign at the inception of the policy.
5. No payout if the policy is cancelled
It is important to understand that, unlike other investments, there is no payout if the policy is cancelled.
As it is a form of life insurance, the policy remains in force for as long as your limited company keeps up the monthly payments.
If you choose to stop paying the monthly fee, then the cover will cease and there is no surrender value.
You can find out more and request a quote from our trusted IFA partner, Broadbench.
Simply fill in your details below, and the team will get right back to you. The Broadbench team has helped hundreds of our visitors over the past five years.
Professional Indemnity Insurance for Contractors
Industry leading PI insurance - from just £13.50 per month via Qdos. Business liability and IR35 insurance cover also available.
