Switching Life Insurance to Relevant Life Cover – What’s The Benefit?
What Benefit can Relevant Life Cover Provide?
Relevant life cover is essentially a ‘death in service plan’. In essence it provides the insured persons family or loved ones with a sum of money should they pass away whilst working for the company.
These plans are paid for by the business or company on behalf of their employee or director. The plans must be written into trust, giving the person whose life is insured the ability to decide who they would like the money to go to, should they pass away.
Now, if you own a business and have a life insurance policy which is separate from the business, changing to relevant life cover could save you money on tax and national insurance premiums.
Relevant life cover is also an allowable business expense, allowing the businesses to deduct this money from profits, lowering the amount of corporation which is payable.
Can Relevant Life Cover be Paid as a Lump Sum?
Yes, it can be paid both monthly or as a single payment for one year of the term. Monthly premiums work best for most businesses, but if you would like to pay for a full year of the term as a single payment before the end of the financial year, this can be accomodated.
How Do I Switch my Life Insurance to a Relevant Life Policy?
Speaking to an adviser will help you decide whether this option is right for you or not. If you have a policy which has been running for a number of years, its unlikely that changing this will offer you any benefit. If you need to increase the amount your policy is for, such as covering a larger mortgage, more expensive cars or additional children it may be worth taking out a relevant life policy to supplement your existing cover.
If your existing policy is for a term which is due to end, taking out a relevant life cover at that point may also be beneficial, however relevant life cover can only run up to the age of 75.
Relevant life cover also works well if your business is looking to offer an additional benefit to you, your family or your staff. These policies are very good at supplementing existing cover such as critical illness cover or income protection, both of which will protect you, not necessarily your family.
Does it Mean I Have to Cancel my Existing Life Insurance Plan?
If you have had a policy for a number of years, even taking into consideration the tax saving element above, it isn’t always cost effective to cancel a policy. If this is the case its better to look as supplementing your cover for an additional amount.
If you have only had a policy for a number of months cancelling the policy could allow you to make savings, as suggested. I would always recommend getting financial advice from a business protection specialist or adviser before taking out a policy.
What Happens If I Leave the Business?
If you leave your currently company and you have Relevant Life Cover, you are able to transfer the policy to a new company. If you would instead like to make the policy a personal plan, you also have the ability to do this.
What If the Business is Declared Bankrupt?
If the business were declared bankrupt you would still have the ability to transfer the policy to another company or to a personal plan, as long as all the monthly premiums were up to date.
If this isn’t a financially viable option, you do have the ability to cancel the plan at any point without any repercussions. But please note that any premiums already paid for the plan would be lost.
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