Mention life assurance and people tend to think about life insurance policies benefiting a family in the event of the death of – usually – the main breadwinners.
With such policies, the premiums have been paid out of general household income – significantly, income upon which they’ve already had to pay tax and national insurance.
For business owners though, there is an option available which provides the same benefits of cover – but with the premiums paid by their company.
A relevant life policy, also known as relevant life cover, is therefore a tax efficient way of putting life cover in place for company owners or directors.
Life assurance: what is relevant life insurance?
Relevant life cover allows companies to offer a death-in-service benefit to its employees (including salaried directors). It’s set up by the company and pays out a tax-free, lump sum on the death (or diagnosis of a terminal illness) of the person insured.
Unlike personal life insurance, the premiums are paid by the company and so are entitled to relief from corporation tax.
Not only that, the company will not have to pay the National Insurance, which would be incurred for traditional life cover premiums.
Relevant life cover is ideal for company owners, directors, or specific employees. An employer may want to opt for relevant life cover if there are too few employees eligible for a group scheme.
The cover should be written into trust, ensuring that the pay-out to family and dependents is swift, with no need to wait for probate to be granted. It will also be exempt from inheritance tax.
In essence, if you are the owner or a director of a company, and you also have life insurance, you might want to think about a relevant life policy as an alternative for you and some of your employees, and save yourself the cost of the premiums as well as mitigate your corporation tax liability.
If you would like to chat to the team at Hartsfield about life assurance and relevant life cover, please get in touch.
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Categorised in: IFAs
This post was written by Paul Verwoert