Relevant Life Insurance
Have you ever considered the impact on your family if you were to pass away?
A relevant life insurance policy could protect your family should this happen. This type of policy can be used as a death in service benefit for small businesses, and is often put in place to protect Limited Company Directors and Employees.
In this scenario, your business would own the policy, the premiums would be paid directly from your business, and you are able to choose who the beneficiary of the policy would be.
One benefit of this type of policy is that the premiums count as an allowable tax deductible business expense, which is more tax efficient for higher rate tax payers as the premiums are paid directly from the business instead of your net income which would already have been subject to normal tax deductions.
What is a Relevant Life Plan?
A Relevant Life Plan is a tax-efficient life insurance policy that provides a lump sum payment to a directors or employee’s family if they pass away while still employed within the business. It’s a smart, cost-effective alternative to traditional ‘death in service’ benefits—offering valuable protection for your team while delivering savings for your business.
Who is it for?
Relevant Life Plans are ideal for:
- Small businesses that don’t have a group life scheme
- High-earning employees who may exceed pension lifetime allowances
- Key individuals you want to reward with tailored benefits
Whether you want to cover a few select employees or offer variable levels of protection, a Relevant Life Plan gives you the flexibility to do both.
Who Can Benefit from a Relevant Life Plan?
Relevant Life Plans are designed to offer flexible, tax-efficient life cover for individuals in your business who matter most. They’re especially well-suited for:
Key Employees
Want to reward specific team members or offer different levels of cover? A Relevant Life Plan allows you to tailor protection to individual employees—ideal for recognising top performers or providing bespoke benefits
Company Directors
For directors, these plans offer a smart financial advantage. When the company pays the premiums, it’s typically treated as a business expense—potentially reducing corporation tax, without being classed as a benefit in kind.
HMRC does not treat the premiums paid by the business as a benefit in kind, meaning policy holders are not required to pay income tax on the premiums. The premiums are also not assessable for employer or employee national insurance contributions.
In this scenario it makes sense for business owners to use any allowances they are entitled to and put the premiums through their business, as these can be treated as an allowable expense for corporation tax.
In summary some of the benefits of a relevant life policy are as follows:
- This type of policy can be less expensive as the business pays the premiums and this can help employers reduce their tax liability
- The policy pays out a tax free lump sum to the beneficiaries of the insured employee/director if they were diagnosed with a terminal illness or if they pass away
- A relevant life policy is a good alternative to a group life insurance scheme, and can be a good option for smaller businesses
- Lump sum payouts from a relevant life policy are not subject to inheritance tax.
There are limits to the level of cover you can put in place, and this is generally based on your age and your income, and varies from insurer to insurer.
There are also options should the business cease trading or where an employee leaves who has a relevant life insurance policy in place leaves the business. In this scenario, some insurers will allow the policy to be transferred to a personal life insurance policy where the premiums would then be paid by the individual rather than the business.
If you are a Company Director considering relevant life cover, please get in touch with our specialist.
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