Relevant Life Insurance in Leicester
Relevant Life Insurance in Leicester
Why directors use it
The practical appeal is straightforward: the company pays the premium instead of you paying it from income you have already been taxed on.
For a director of a small limited company, the effect is that the same amount of cover costs the household noticeably less than an equivalent personal policy. Nothing about the cover itself is inferior — it is standard life insurance, underwritten normally.
Broadly, and subject to conditions:
The tax treatment depends on your circumstances and on rules that change. Confirm the position with your accountant before relying on it. We do not provide tax advice.
- Premiums are typically an allowable business expense
- They are not normally treated as a benefit in kind for the employee
- The payout is normally free of income tax
- Written in trust, it normally sits outside the estate for inheritance tax
- It generally sits outside pension allowances, which matters for higher earners
Who can have it
Yes: employees and salaried directors of a limited company. That includes a director of their own company who pays themselves a salary.
Generally no: sole traders, and equity partners in a partnership or LLP, because they are not employees of a company. If that is your position, personal life cover is the route — see how much life insurance do you need.
How it is set up
The company applies for and owns the policy, and pays the premiums. The policy is written in trust from outset, with the employee's family as beneficiaries.
That trust is not optional and not an afterthought — it is part of what makes the arrangement work. It also means the payout goes directly to the family without waiting for probate. See putting life insurance in trust.
The employee is underwritten in the usual way, with medical questions and sometimes a nurse screening or GP report depending on age and sum assured.
Comparing it properly against personal cover
The right comparison is not premium against premium. It is what it costs you personally to have the cover in place.
With a personal policy, you pay from money that has already passed through income tax and National Insurance. To fund a given premium, the company must pay you noticeably more than that premium in gross salary or dividends.
With relevant life, the company pays the premium directly, and where the usual conditions are met it is typically an allowable business expense and not a benefit in kind.
The practical effect for a director of a small limited company is that the same sum assured costs the household meaningfully less — often substantially so, once the tax on the equivalent personal premium is accounted for.
We will set both out side by side, showing the real cost to you of each, so the decision rests on actual numbers. The exact saving depends on your tax position, which is a question for your accountant.
What it does not do
Worth being clear, because these are regularly confused.
Relevant life pays the family. It does nothing for the business.
If your concern is the company's ability to trade after losing someone, that is key person cover. If it is what happens to a deceased owner's shares, that is shareholder protection under business protection cover.
Many director-owners need more than one of these. They solve different problems and the policies are structured differently.
Practical points
Critical illness usually cannot be added
Relevant life is generally death-only, with terminal illness included. If you want critical illness cover, it typically has to be arranged personally or through a different structure.
Check portability before you commit
Cover normally ends if you leave the company. Some policies allow transfer to you personally or to a new employer without further underwriting — a valuable feature if your health changes.
The term usually cannot run past retirement age
Relevant life is employment-linked, and policies are normally written to end by a specified age.
Review it if the company structure changes
If you incorporate, disincorporate, or change how you are paid, the arrangement may need revisiting.
Group cover once you have a few employees
Relevant life is designed for individuals. Once a company has a handful of employees it wants to cover, a group death in service scheme often becomes the better route.
Group schemes typically cover everyone up to a set multiple of salary with limited or no individual medical underwriting, which is valuable where someone has a health condition that would make personal cover expensive. Administration is simpler than running several separate policies.
The crossover point varies, but it is worth reviewing once you are covering more than a few people.
Relevant life remains useful alongside a group scheme — for a director wanting cover above the scheme's ceiling, for instance. The two are not mutually exclusive.
Speak to us
We will confirm whether relevant life is available to you, compare it against personal cover on a like-for-like basis, and set it up in trust.
Call 0116 277 7536 or book a free consultation.
Cedar House, 3 Broad Street, Enderby, Leicester, LE19 4AA.
Common questions
What is relevant life insurance?
Life cover taken out by a company on an individual employee or director, with the benefit paid to their family rather than to the business. It works like a death in service scheme for a single person, and it is designed for companies too small to run a group scheme.
Who can have it?
Employees and salaried directors of a limited company. Sole traders and equity partners generally cannot, because they are not employees of a company. If you are a director paying yourself a salary through your own limited company, you usually can.
How is it different from personal life insurance?
The company pays the premium rather than you paying from taxed income. The policy is written in trust from the outset, so the payout goes directly to your family. The practical effect for most directors is that the same cover costs the household considerably less.
Is it really tax efficient?
Usually. Premiums are typically an allowable business expense, are not normally treated as a benefit in kind, and the payout is normally free of income tax and outside the estate for inheritance tax when written in trust. The treatment depends on your circumstances — confirm it with your accountant.
Does it count towards my pension lifetime allowance or annual allowance?
Relevant life policies are generally structured to sit outside pension allowances, which is one reason higher earners use them. Pension rules change, so confirm the current position with a financial adviser or accountant.
What happens if I leave the company?
The cover normally ends, since it is owned by the employer. Some policies allow it to be transferred to you personally or to a new employer without further medical underwriting. Check whether that option exists before you take the policy.
Related
Important information
This is a protection policy with no cash-in value at any time. Cover is subject to underwriting and to the terms and exclusions of the individual policy. If you stop paying premiums, cover will end.
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