A Closer Look At Relevant Life Cover For Directors
Are you a company director who has just discovered the benefits of relevant life cover? You might feel like you have been missing out, and, in honesty, you might have been.
Relevant life insurance has existed since 2006. It is a way for smaller companies and SMEs to provide a death-in-service benefit for their directors and employees. The thing that excites company directors most is the tax efficiency.
Relevant life insurance provides essential life insurance for your family, and the business pays the premiums as a qualifying expense, meaning you can claim corporation tax relief against the cost.
Instead of paying for life insurance, directors using relevant life cover can save up to 62% on their life insurance from tax. In many cases, it adds up to tens of thousands of pounds in some cases and is well worth it.
Tax-Free Payment To Your Family
As with any other life insurance, a lump sum is paid tax-free to your family in the event of your death with relevant life cover for directors. These funds can be essential when your family has lost the income they need to survive and are paid into a trust. This means that your family has full control and access to the trust to use it as they see fit.
Tax Relief On Premiums
There are several tax benefits to relevant life cover for directors, including:
Corporation tax relief
As the premiums paid for your relevant life cover are classed as a business expense, the business can claim corporation tax relief against them. This helps reduce company profits and, consequently, the corporation tax bill you will have at the end of the year.
Benefit in kind
There is no benefit in kind tax to pay for relevant life covers for directors. This means that there is no income tax to pay. If you had a personal life insurance policy, you would have to pay income tax on the income to allow you to pay the premiums. The business pays the premiums with relevant life insurance, so you save on income tax.
These tax savings lead to a 62% saving when using relevant life insurance instead of a personal policy.
Based on a premium of £40 a month over an average term, the savings could be as much as £12,000, making relevant life insurance a really attractive type of insurance.
Which Insurers Offer Relevant Life?
There are around ten providers in the UK, with insurers such as L&G, Zurich, Aviva, LV, Royal London, Vitality and a few more making up the leading insurers on the list.
Relevant life cover for directors is a death-only policy with no critical illness options. The cover is the same from one insurer to the next, so choosing the right insurer is more about how competitive the premiums are, rather than the intricacies of the conditions that are covered.
We have accounts with every insurer and can offer quotes before you decide which guarantees you the best value premiums.
One insurer to highlight for relevant life cover for directors is Vitality. They offer cheaper premiums if you interact with their health trackers, attend the gym, carry out non-smoker tests, and earn health points in several other ways. The issue is that if you stop doing these things in the future, the premiums increase and eventually can become more expensive than the more standard approach that didn’t consider these things.
Can Relevant Life Insurance Be Increased or Decreased?
Relevant life insurance can be taken out on an increasing or decreasing basis. You can opt for an increasing level of cover that increases with either CPI or RPI.
Premiums will also increase with each cover increase and may increase disproportionately with the cover, so be careful here. You can opt out of increases in the future if you feel it’s going up too much, or just stick with level cover from day one.
Decreasing cover is also available, meaning the coverage will decrease as you age. Premiums will stay the same but will be discounted from inception to consider the decreasing nature of the cover.
Can Employees, As Well As Directors, Use Relevant Life Cover?
Relevant life cover isn’t just for directors – it is actually an employee benefit, so yes, it can be used for employees and directors in the same way. If you have more than eight employees, it might be more cost-effective to take out a group protection plan. This is one policy that has all of your employees listed.
A suite of relevant life insurance policies might be more accessible for smaller teams. These policies can also be converted into personal policies if an employee leaves.
Even if a group policy is used, at Executive Life, we usually recommend that company directors take out relevant life insurance. If the company is sold in the future, the policy can be transferred to a new limited company or even converted into a new plan without the need for further medicals or changes to the premiums.
The Relevant Life Insurance Application Process
The great news for busy company directors is that we can set up a relevant life policy for you over the phone, with no paperwork required.
We go through all the questions with you and complete all the application forms. The insurer usually then writes to your GP, and sometimes, a medical is required.
The medical field is very light touch, and a nurse will visit your home or place of work and check your height, weight, and blood pressure. They also double-check the medical questions that you have already answered.
Once this is all complete, an insurance offer is made, and if you agree, the policy goes live.
Next Steps
Contact Executive Life today to find out the best way to set up your insurance as a business owner, or to arrange a free quote for relevant life cover for directors. We can provide easy and direct guidance over the phone and even offer a quote from every insurer in just 60 seconds.
Frequently Asked Questions
Can a director claim life insurance?
A director can claim life insurance through a personal policy, but relevant life cover offers a more tax-efficient way for a company to provide life insurance specifically for directors and employees.
Who is eligible for a relevant life plan?
Employees and directors of a company are eligible for a relevant life plan, provided the company pays the premiums and the policy is set up under a discretionary trust.
Who owns a relevant life policy?
The company or employer owns the relevant life policy, and it is taken out on the life of an employee or director.
Is relevant life cover a business expense?
Yes, relevant life cover is considered a legitimate business expense and is tax deductible for the employer, making it a cost-effective option for providing life insurance.
Which UK based insurers offer cover?
L&G, LV, Aviva and several other insurers offer relevant life cover for directors and employees. It is quite a specialist area, so contact our team at Executive Life to find the best value policies for you.
