Relevant life cover: a cost-effective option for business owners.
Taking out life insurance is often a consideration made only when thinking about personal finances.
Individuals consider making provision for pensions, income protection, life insurance and critical illness cover. These provisions are typically put under the heading ‘home finances’.
But for company owners and directors, relevant life cover may be better thought of in relation to working life. Because, if relevant life cover is provided via the business, it brings all the benefits of personal life insurance, but for less expense.
What is relevant life cover?
In many ways, relevant life cover operates like traditional life insurance. There is a one-off payment in the event of the death of the person covered, or if they are diagnosed with a terminal illness.
However, here is where the similarity ends. The premiums for life insurance are paid by the insured person from their net income. With relevant life cover, 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 either. This would normally be incurred for traditional life cover premiums.
So this 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 a 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 relevant life cover as an alternative for you and some of your employees.This can save yourself the cost of the premiums as well as mitigate your corporation tax liability.
Relevant life cover is “life cover” but not as we know it!
If you would like to chat to the team at Hartsfield about this, then please get in touch.
Categorised in: IFAs
This post was written by Melanie Dolphin