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Business protectionDeath in service for a company of one.
Life cover for a single employee or director, arranged and paid for by the company. It is designed for businesses too small to run a group death in service scheme, which in practice means most limited companies in Peterborough.
Why companies use it
It does much the same job as personal life cover, but it is bought by the business and set up under different rules.
- Who it covers
- One named employee or director
- Who pays
- The company
- Where it pays
- To a discretionary trust for the family
- Not available to
- Sole traders and equity partners
Cover for one person
Group schemes usually need a minimum number of employees. This gives a single director or key employee the same kind of benefit without a scheme.
Held in trust from the start
The policy is written into a discretionary trust when it is set up, so the payout goes to the family rather than into the company or the estate.
Paid from the company
Premiums come out of the business rather than your taxed personal income. How that is treated for tax depends on your circumstances, so your accountant should confirm it.
How it is set up
Confirm you are eligible
You need to be an employee of the company, which includes salaried directors. Sole traders and equity partners cannot use it.
Decide the amount and term
Usually a multiple of total remuneration, and a term that ends by a stated age. Insurers apply their own limits on both.
The company applies, the employee is underwritten
The business is the applicant and pays the premiums. The health questions are about the person covered.
Establish the trust
This is part of the application rather than an afterthought. Getting it right is what makes the arrangement work as intended.
Relevant Life Insurance, answered
- Who can have a relevant life policy? Employees of a business, including salaried directors of a limited company. Sole traders and equity partners of a partnership are not eligible because they are not employees.
- Is it a benefit in kind? In most straightforward cases it is not treated as a P11D benefit, which is a large part of the appeal. Tax treatment depends on your circumstances and should be confirmed with your accountant.
- Can it include critical illness? Not within a relevant life policy. If you want critical illness cover for a director, it needs to be arranged separately or through a different structure.
- What happens if I leave the company? The cover is tied to your employment. Many policies can be transferred to you personally or to a new employer, but check that before relying on it.
- How much can be covered? Insurers usually work to a multiple of total remuneration, and the multiple is normally more generous for younger lives. We will tell you the ceiling before you apply.
No minimum number of employees, which is what makes it work for small limited companies.
If you are a director paying for personal life cover out of your own taxed income, this is worth half an hour of your time.
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Ask us about relevant life insurance
Tell us where you are up to and an adviser will come back to you. The answers below just save us a phone call working it out.
- One of the five advisers on Eastfield Road, not a call centre.
- Usually the same working day.
- No obligation, and nothing to sign at the end of it.
Would rather talk now? Call 01733 602 033.
Director of a limited company?
We will tell you whether this is a better route than the personal policy you already have.