Relevant Life Insurance

Relevant life insurance can provide an efficient way for a company to provide death-in-service benefits to staff. Caspian can help guide you through your options

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What is Relevant Life Insurance?

 

Relevant Life Insurance can provide a cost-effective solution for businesses, in order to offer death-in-service benefits to its staff. It’s popular amongst businesses that want to provide benefits to other directors and employees, without establishing a group life scheme. It’s available to all employees of companies registered in the UK.

Here we’ll talk you through:

·  What is Relevant Life Insurance?

·  How does it work?

·  What are the benefits?

·  Why do you need Relevant Life Insurance?

What is Relevant Life Insurance?

Relevant Life Insurance is a type of Business Life Insurance that allows a business to provide individual death-in-service benefits to its employees. If the insured employee was to pass away while working for the business, the policy will pay out to their dependents.

The policy pays out a lump sum if you die or are diagnosed with a terminal illness.


How does it work?

Relevant Life Insurance is available to employees of companies registered in the UK, which means it may not be suitable if you are self-employed or a sole trader.

This type of policy is set up on a life-of-another basis. This means the business sets up and pays for the policy, but the pay-out goes into a Trust for the employees’ beneficiaries.

Each individual is assessed based on health and lifestyle factors, as well as the amount of cover needed. The business will then pay the monthly premiums. The amount of cover is set based on a multiple of the employee’s salary.

You have two options when taking out Relevant Life Insurance. Cover can either be taken out for a set amount, known as level cover, or it can be linked to inflation. If you choose the latter, your level of cover will increase in line with inflation. It’s important to remember the premiums will also change.

If an employee leaves the business, the employee can either take over the policy personally, or it can be taken over by a new company.


What are the benefits?

Relevant Life Insurance essentially provides employees with life insurance without having to pay the premiums themselves. It can give employees peace of mind that you value and care for your staff, which can help when it comes to recruiting and retaining employees.

For many small businesses, Relevant Life Insurance is more cost-efficient than a group life scheme. However, it’s very difficult to compare the two as they run for very different policy terms.

It can also be particularly beneficial for high earners, because Relevant Life Insurance doesn’t count towards their pension lifetime allowance.


Why do you need Relevant Life Insurance?

Relevant Life Insurance is not a legal requirement, and businesses don’t have to offer it. However, it is treated as a business expense and the business can therefore claim tax relief on the premiums.

There are also no National Insurance contributions to be paid by either the employee or employer, and the policy is not a P11D benefit.

In competitive industries, offering Relevant Life Insurance could be a huge part of your recruitment efforts.


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