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Relevant Life Policy

Tax efficient life cover for company directors and senior executives.

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What is a Relevant Life Policy?

A Relevant Life policy is an individual ‘death in service’ life policy. It is a term assurance plan which pays a lump sum benefit to the insureds loved ones, if they become terminally ill or die during the term of the plan.

The policy is similar to life insurance but can be a very useful tax efficient alternative, whilst also providing a valuable 'death in service' benefit for you and your employees.

Relevant Life Policies have unique tax benefits because the insurance policy is paid for by the business on the behalf of the employee. While the policy is personal to you and your employees’ the policy counts as an allowable business expense - it is also tax deductible and doesn’t count towards annual or lifetime pension allowances. Effectively the tax man helps you pay for yours and your employees life cover.

Although the policy is paid for by the business the sum assured goes directly to the bereaveds loved ones, this is because the policy is written in trust. A trust is a legal document which states exactly where the money should be paid in the event of your death, this prevents the sum from becoming part of your estate and is not subject to inheritance tax.

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen

Relevant Life Policy Frequently Asked Questions

Below are some of the most frequently asked questions about Relevant Life Cover.

What is a Relevant Life Policy?»

Relevant Life Cover is a 'death in service benefit'. In simple terms it is a life insurance policy taken out by a company for an employee, which will pay out directly to the employees beneficiary should they die whilst in employment.

Who can take out a Relevant Life Policy?»

The policies can be taken out by a UK Ltd company or a Limited Liability Partnership, on the life of one of their employees.

Who owns the policy?»

The policy is owned by the company. However any claim would be paid to a trust which is run through the trustees. In simple terms the insurance is owned by the business, but any benefit received goes directly to the employees chosen loved one.

Can I transfer Relevant Life Insurance to another company?»

Yes, the policies can be transferred to a new company or turned into a personal policy, depending on the needs of the policy holder.

How much does a Relevant Life policy cost?»

Relevant Life Cover is normally very similar in cost to a normal term life insurance. Individual prices vary and are dependant on lifestyle and medical health, its also important to note that not all insurance providers offer Relevant Life cover, prices may not be as competitive. The tax advantages of a Relevant Life policy do mean you can make significant savings. If you would like a quote for Relevant Life cover, please use our online form.

How long does it take to set up a policy?»

Once a Relevant Life application has been submitted to the underwriter it can take anything from a few days to a few months to underwrite. It really depends on many factors including the health of the life assured. Normally a healthy person should expect to have a policy up and running within 2 to 3 weeks. Relevant Life cover needs a trust document to be filled in by the life assured which can means witness signatures. We normally find that this is the part which may hold up the policy underwriting, it's important to note that underwriting such as GP reports and medicals are reliant on third parties which can slow the process down.

Does the policy have to be taken out by a UK company?»


Can a partnership take out Relevant Life cover?»

Yes Limited Liability Partnerships’s are treated in the same way as limited companies when it comes to Relevant Life Cover. The only exception is with Equity members of the LLP. For more information in regards to this please contact us using our online form.

How much should I insure the person for?»

Although a Relevant Life Policy is seen as business protection its really for the benefit of the life assured’s family. For that reason its really down to the individual to decide the level of policy necessary. We normally suggest people take into account outstanding debts such as mortgages but also think about money that the remaining family will need for general living. Provider limits tend to be 15 or 20 times remuneration, dependent on age

Is Relevant Life tax deductible?»

One of the main benefits of a Relevant Life Policy is the fact that it is seen as a company expense and is therefore tax deductible. The policy is also placed in a trust which is outside of the estate. This can help with inheritance tax issues as well. Information regards to taxation levels and basis of reliefs are dependent on current legislation. Individual circumstances are not guaranteed and may be subject to change. The Financial Conduct Authority do not regulate trusts.

How long does the policies term need to be?»

A Relevant Life Cover is a life only insurance policy (you can not add critical illness). The terms are treated the same as normal term life insurance as far as the life assured is concerned. For example you can take out Relevant Life on a 'whole of life' term, then should you stop working for the company you can then transfer the policy to a personal plan. Basically you can choose any length of time for the policy term. However it is important to note that should you need to renew the policy in five or ten years the cost may increase due to age or changes in medical history.

How long should we take out the policy for?»

Relevant Life Cover is paid to the trust and ultimately the family so the longer the term the better. As everyone knows the likelihood of death becomes higher as you get older. Polices are normally a guaranteed premium so its good to lock the premium in when you are young for as long as you can. The premiums will be more expensive short term. People are different so its really down to the individual on budget and what they are policies. As polices are paid by the company you may want to make sure you are using a provider which is happy to switch the policy to another owner if you leave that company or the company cease trading. In some circumstances you may be able to convert the policy into a normal term assurance paid by yourself.

Can we add critical illness to Relevant Life cover?»

No. The unique tax savings of this insurance prohibit the individual being insured from directly benefiting from the policy. The benefit can only be received by their loved ones, so critical illness cannot be added to the plan.

Will I have to have a medical?»

This depends on age, health and sum assured. Policies over £500,000 normally always require a medical no matter which provider the insurance is taken out with.

Is there a limit on how much Relevant Life cover I can take?»

Provider limits tend to be 15 or 20 times remuneration, dependent on age

Can anyone take out a Relevant Life Policy?»

You have to be employed by a Limited company or Limited Liability Partnership which is based within the United Kingdom to take out Relevant Life cover.

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