Relevant life insurance is a practical way for small businesses to provide death-in-service benefits to employees without the need for a group policy. It’s a flexible option, often used by business owners, to offer financial protection for their team or themselves.
In this article, we'll look at how this type of cover works as well as its benefits.
Speak to a relevant life expert now
What is relevant life insurance?
Relevant life insurance is a type of policy intended for businesses and their employees. Unlike personal life insurance, it acts as a type of death-in-service benefit through the company.
The cover is typically set up under the company’s name and aims to provide financial assistance in the event of an employee’s death.
Employers are responsible for paying premiums and managing the policy. It's up to them to inform their employees of the policy and its benefits so that everyone understands the cover provided.
How does relevant life cover work?
When an employee covered under a relevant life plan passes away, a lump sum benefit is paid out to their family on behalf of the company.
This type of insurance works like a standard life policy - the insured chooses the level of cover they require. This includes factors like their income and the financial needs of their dependants.
Premiums depend on the policyholder’s age, health, lifestyle, and cover amount. Businesses can deduct these payments as a tax expense, making it a smart choice for both the company and employees.
Who can benefit from relevant life insurance?
Relevant life plans could be beneficial for small and medium-sized businesses that are looking to provide security for their employees as well as potential tax benefits.
It could also be useful for companies that don't have enough eligible employees for a group life policy but still want to offer death-in-service benefits to attract and retain top talent.
Who can be covered by relevant life insurance?
The plan can cover a range of employees, usually including:
Employers who want to offer protection but don't have enough employees to set up a group plan.
High earners, like directors, who want to ensure their death-in-service benefits don't count towards their lifetime allowance.
Company directors who wish to arrange death-in-service cover for themselves without including all employees.
If you are an employee under a relevant life insurance plan, it may still be worth having your own personal life cover. If you leave the company you will no longer be covered under the company's plan, so it could be best to have some cover to protect your family/loved ones.
The Benefits of Relevant Life Insurance
Relevant life insurance offers advantages for both employers and employees, such as:
Tax efficiency: Businesses can deduct premiums as expenses, reducing corporation tax. The death benefit is generally free from inheritance tax*, helping beneficiaries financially.
Flexibility: The policy can be tailored to suit the specific needs of your business and its employees, offering adjustable levels of cover.
Benefits for small businesses: Can be an attractive benefit for small business owners, helping to retain key staff and demonstrate a commitment to employee wellbeing.
Protection for directors and shareholders: They can use the plan to safeguard the business in the event of a key person’s death, helping to cover potential debts or losses.
*Providing the total value of the deceased estate does not exceed the threshold of £325,000. Anything above the threshold will be taxed by 40%.
Get advice on Relevant Life Plans
Relevant life insurance is not available through the Cavendish Online website, as eligibility varies, and it’s important to determine whether it’s the right fit for your needs.
Our team of professional, friendly, and knowledgeable advisers are here to assist with any questions you may have. They can provide quotes for relevant life cover and ensure it is set up correctly, offering support throughout the process.
Call now to speak to a relevant life expert today.01392 43 61 91 (Mon - Thurs 9am - 5.30pm, Fri 9am - 5pm)
