When it comes to running a business, you want the best for your employees. In searching for the best benefits and protection, you might have come across the term “relevant life insurance”. It is a fantastic way to help your employees while benefiting your business, yet many people are unsure of its uses and benefits.
In this post, we’re going to answer the question “what is relevant life insurance?” and uncover the benefits it can bring to your business and employees.
What is relevant life insurance?
Relevant life insurance refers to a type of policy paid for by a business that offers its employee’s life insurance. It is a form of death-in-service benefit but is more cost-effective for smaller companies than a group life insurance scheme. If an employee should become terminally ill or die, the policy will pay out to that person’s beneficiaries.
However, recent statistics have shown that 8.5 million people in the UK are currently living without life insurance, meaning their families could be at financial risk if the worst should happen. So, relevant life insurance is not only an excellent way to help your employees feel valued by your company, but it can also offer essential financial protection.
Who is eligible for relevant life insurance?
A relevant life plan can cover individuals, contractors, and partners employees by a business. It’s ideal for companies without a group life insurance plan, but those with a group policy can take it out as an additional policy. This approach can offer particular benefits to high-earning employees, as relevant life insurance doesn’t impact pension allowances.
A range of business types and structures are eligible for relevant life insurance, including but not limited to:
- Limited companies
However, organisations with no employer/employee structure, such as sole traders and equity partners, are usually not eligible for this type of policy. Equally, these policies are generally for employees under 75 and do not include other insurances such as income protection.
What are the benefits?
Now that we’ve established “what is relevant life insurance?” let’s take a closer look at some of the benefits this type of life insurance can bring.
It makes business sense
Relevant life insurance is ideal for small business owners (SMEs) thanks to the personal and business savings available. While group life insurance policies can work out as cheaper for larger companies, relevant life plans are more tax-efficient for SMEs and ensure the policy covers the company director alongside the employees.
Moreover, covering your employees under a relevant life insurance policy can help them feel valued, thereby improving staff satisfaction and retention rates.
It can help your employees
This type of life insurance policy is great for employees, too, as they do not have to pay the yearly premiums. The payouts are also tax-free under a relevant life plan, meaning your employees can rest assured that their loved ones are looked after in the event of their death.
Plus, life insurance payouts are more common than you might think. A recent survey in 2018 from the Association of British Insurers found that the public thought insurance companies only paid out on 37% of life insurance claims, whereas the actual figure is 97.6%.
It can save you money and tax
You can even save money with a relevant life insurance policy. The typical annual premium on a relevant life plan is less than the average life insurance policy, meaning it’s more cost-effective for your business and employees.
The most significant benefit of relevant life insurance policies is tax savings. As the premiums are not treated as a P11D benefit in kind, both the employee and employer will not have to pay National Insurance Contributions for this life insurance policy. Plus, under current UK tax rules, a relevant life plan will not usually impact the employee’s Pensions Lifetime Allowance. And, in the event of a claim, the payout is typically free from income, inheritance, and capital gains tax.
Find the best deal on for relevant life insurance
If you’re ready to take out a relevant life insurance policy for your business, then it’s vital to shop around for the best deal.
Contact our team at WIS Business Protection to discover the best provider and price for your company. As insurance specialists, we can offer advice on which insurance policies you need, ranging from relevant life plans to business income protection insurance and business life insurance.