Relevant Life is a type of life cover that an employer can provide for its staff, including directors. The business pays regular premiums based on the level of cover. If the person covered dies whilst in employment during the term, the plan pays a fixed, one-off lump sum to the policy’s beneficiaries. While it is the policy’s beneficiaries and not the business that receives the pay-out if the insured person dies, the premiums can be treated as an allowable business expense – with corporation tax relief, no additional income tax or NI to pay, it is cost and tax efficient for the business and the employee.
Who can take out a Relevant Life Plan?
To be eligible for a Relevant Life Plan (RLP), the person covered must be an employee of a UK business, which can include company directors who are salaried. Unfortunately, RLPs are not available for sole traders, equity partners of a partnership or equity members of a Limited Liability Partnership.
How it works
Company takes out Relevant Life Plan
Employee’s life is insured
The RLP is put in trust to a person of the employee’s choice
If the employee dies during the term, a claim is made by the trustee/s
The plan pays out to the trustee/s (inheritance tax planning)
Key benefits over other group death-in-service schemes
Tax efficiency – an allowable business expense that can be offset against corporation tax bills
Separate from pension contributions – premiums and benefits don’t count towards the annual or lifetime pension allowances
Individual cover – if a director or employee leaves a small business, they can keep the policy going by taking on the premiums, without the need for a new application, medical or underwriting
More extensive cover – depending on your age, you can insure up to 25x your earnings