Learn more about the differences between life assurance vs relevant life insurance from the team at WIS Business Protection.
There are a number of differences between life assurance vs relevant life insurance, though both are insurance policies companies take out to provide for a policyholder’s family if they pass away. Offering a life insurance policy can be a key benefit for employees and companies who offer these might also be entitled to further tax benefits. In this guide, we look at what is life assurance, what is relevant life insurance, what are the differences and which might be best for your company.
Life assurance
A life assurance policy covers the policyholder for their whole life, not just a set period. A life assurance policy will pay out a tax-free sum to the person specified when if the employee passes away. You can choose to increase the cover of the policy but it can’t decrease. This type of policy brings more peace of mind as it lasts for your entire life but it could be more costly. As long as the premiums are paid, the policyholder is assured that a valid claim will be paid regardless of when they die. These policies are often used in inheritance tax planning and are usually taken out by individuals.
Relevant life insurance
Relevant life insurance policies are usually taken out by businesses for their employees and have a limit on how long they are insured for, but they are paid by the company, not the individual. Businesses can choose to take out relevant life insurance cover for their employees and this policy will cover the individual for a set period of time if they die. With a relevant life insurance policy , a set amount will be given to whoever the policyholder has named and this is usually tax-free.
Life assurance vs relevant life insurance
There are some similarities between life insurance and life assurance as they are both forms of protection which will payout after the policyholder dies. The main difference between life assurance and relevant life insurance is the way they work and how long the policy lasts for. Relevant life insurance policies are paid for and owned by the business rather than the person who is insured, whereas life assurance policies are mainly taken out by individuals.
Financial benefits of relevant life insurance
There are also a number of financial benefits for businesses financial benefits for businesses</a> when they take out relevant life insurance. Usually, relevant life insurance premiums are classed as business expenses so they can be deducted from tax bills. This can help businesses to reduce corporation tax and they won’t have to pay National Insurance on the payments.
Length of time covered
Life insurance will only cover the person who has the policy for a specified period of time, for example, it could end when they turn 75 or if they leave the company. With a life assurance policy, these conditions wouldn’t apply as the policy is for life.
Level of cover
There are normally three levels of cover when it comes to relevant life insurance policies – level, decreasing and increasing cover for the policyholder. A level policy means the holder has a set sum, while a decreasing policy means the payments get less over time and increasing policies go up with inflation. It’s worth talking to a income protection expert if you are considering taking out a policy to decide which level of cover is best for you or your business.
Cost difference
Another difference is that life assurance policies are usually more expensive as they are guaranteed to pay out so companies will charge for this. Relevant life insurance policies are cheaper as they only cover a fixed term and they can also have tax benefits for businesses as the payments are classed as business expenses.
Life assurance vs relevant life insurance: which is best?
The best type of life insurance policy you can take out will be dependent on your circumstances. They are, in fact, quite different products with different purposes and will be suited to different budgets. Most businesses choose a relevant life insurance policy, whereas individuals looking for long-term cover for their dependents might be better suited to a life assurance policy.
Contact us today
If your business is looking to provide more benefits for your employees and wants to make the most of a life assurance or relevant life insurance policy, at WIS Business Protection we have a range of flexible and convenient options. Call one of our specialist advisors today on 020 3011 1968 to see how we can protect your business and its employees for many years to come.
