Relevant Life Insurance for Directors: Tax-Efficient Life Cover
Speak to An ExpertCustomers love us! Don't take our word for it. Check out what some of them have to say...
Is Relevant Life Insurance Suitable for You?
Relevant Life Insurance is specifically designed for directors and employees of limited companies.
Who benefits from Relevant Life Cover?
If you are a higher or additional rate taxpayer, paying for personal life insurance from your net income is highly inefficient. Relevant Life allows you to bypass income tax and National Insurance on the premiums.
Companies that are too small to set up a group death-in-service scheme (which typically requires a minimum number of employees) can use Relevant Life to provide the exact same benefit on an individual basis.
Unlike standard group life schemes, Relevant Life payouts do not count towards your Lifetime Allowance (LTA), making it ideal for directors who have already built up substantial pension savings.
Key Financial Benefits
The primary advantage of Relevant Life Insurance is the significant tax savings.
The premiums are generally considered an allowable business expense, reducing your company’s Corporation Tax bill.
The premiums are not treated as a P11D benefit-in-kind, meaning you do not pay personal income tax on them.
Neither the employer nor the employee pays National Insurance contributions on the premiums.
Because the policy is written into a specific Relevant Life Trust, the payout goes directly to your beneficiaries free of income tax and usually free of inheritance tax.
Protection Strategies
To ensure the policy qualifies for the tax benefits, strict HMRC rules must be followed:
- The Trust: The policy must be written into a Relevant Life Trust from the outset.
- The Beneficiaries: The payout must go to an individual (e.g., your spouse or children) or a charity, not to the business itself. If the business needs the money, you need Key Person Insurance instead.
- Age Limits: The cover must cease before your 75th birthday.
- Critical Illness: Relevant Life policies can only cover death or terminal illness (where life expectancy is less than 12 months). They cannot include standard critical illness cover.
Case Studies
Speak to a Broadbench Specialist
If you run a limited company, your life insurance should be working as hard as you do.
Speak to a Broadbench specialist today to calculate exactly how much you could save by switching your personal life cover to a Relevant Life policy.
FAQs
Am I eligible to take out a Relevant Life Insurance policy?
You must have a limited company to benefit from the tax savings that a relevant life insurance policy offers. If you do not have a limited company then standard Life Insurance will offer you the protection you need.
Do I get any money back if I don't die before the Relevant Life Insurance policy term ends?
No. There’s no cash value at any time. Just like standard Life Insurance at the end of your Relevant Life Insurance policy term you stop making payments and your cover ends.
Can my mortgage be covered with Relevant Life Insurance?
If you have an interest-only mortgage, your outstanding mortgage loan stays the same until you repay it at the end of the mortgage term. Level Relevant Life Insurance could cover this type of mortgage.
How does Relevant Life Insurance work? What do I need to know?
Like standard Life Insurance, it provides your loved ones with a large tax-free, one-off payment, or monthly payments if you pass away. It can be used to pay the mortgage off or help your family with living expenses. You are covered only for the duration (term) of the policy and cover only lasts while you keep up monthly premiums. Monthly payments can be reduced by combining this with a Critical Illness policy.
The key difference between Life Insurance and Relevant Life Insurance is that with Relevant Life Insurance the cost of the premiums is moved from your own pocket to your company expenses. This saves you tax and reduces the cost of your monthly premiums.
Additionally, this is not treated as a benefit-in-kind; the premium is not included as a P11D benefit, nor are premiums subject to National Insurance payments for the employer or employee.
There is significant tax relief with a Relevant Life plan and your business can claim Corporation Tax Relief on the premiums. Plus, the payout itself is tax-free.
Do I get any money back if I don't die before the policy term ends?
No. Like standard term life insurance, there is no cash value at any time. At the end of the policy term, you stop making payments and your cover ends.
What is Terminal Illness Cover?
Terminal Illness Cover will pay out when you contract an illness/ disease that has no known cure or has progressed to a point where it cannot be cured, and you aren’t expected to live longer than 12 months.
What's the difference between Relevant Life Insurance and Over 50s protection?
The main difference is that Relevant Life Insurance is a tax-efficient term policy, so it covers you for a specific amount of time, while over-50 life insurance is a whole of life policy, so it covers you for the rest of your life.
Typically to take out a Relevant Life Insurance policy you need to be aged between 18 and 77 to apply, and your coverage stops at the end of the policy term. You choose a cover amount, and if you want your cover to remain the same, be protected from the effects of inflation, or decrease over time broadly in line with a repayment mortgage or loan. You can take out a single or joint life insurance policy.
If you’re not sure which one might be right for you, speak to a Broadbench financial adviser.
What’s the difference between Relevant Life and Life Insurance?
Life Insurance is cover that you pay for with your own money. However, if you are set up as a limited company, you can pay for your Life Insurance through your business, as a tax-deductible expense, saving you 20%. This is known as Relevant Life Insurance.
Stop Overpaying for Life Insurance
Fill out the form below to arrange a time to speak to a Broadbench adviser who specialises in Relevant Life Insurance for directors.