How Relevant Life Insurance Plans Can Future-Proof Your Business

Last year, UK inflation reached the highest level that it had been for decades. The markets became unsteady and nervous with people preserving their funds and this has then had an impact on investment values. Financial advisors quickly looked for ways in which they could recoup their losses, looking for something which added value, reduced costs and most importantly, protected their clients. 

Relevant life insurance plans are particularly useful for those who have small limited businesses and who may pay their life insurance premiums directly from their income. Businesses can, using relevant life insurance policies, pay life insurance directly which can also be hugely tax-efficient and reduce the cost overall for both directors and the company. 

What Is Relevant Life Insurance

Relevant life insurance (RLPs) is a policy which businesses can take out in order to provide life insurance for employees, including directors. RLPs allow employers to give all employees a tax-efficient, death-in-service benefit. This policy can be particularly attractive for directors or other high-earning employees who have a substantial pension fund and don’t want their benefits to form part of their pension lifetime allowance. 

One of the main purposes of an RLP is to provide a benefit in death before the age of 76. But, other benefits given in respect of ill-health, disability and death caused by an accident may also be payable if the life insured is still within employment. 

A relevant life insurance policy is paid for and applied by the business and is written into the trust from the outset. This then pays out a lump sum to the employee if they are diagnosed with a terminal illness whilst still employed during the policy term, or it is paid out to beneficiaries if they die. 

What Are The Benefits Of A RLP?

A relevant life insurance policy is a cost-effective way for businesses to provide death-in-service benefits to employees. They are also tax-efficient for both the employer and the employee. As well as these points, other benefits include:

  • The death benefit, as well as any terminal illness benefits, will not form part of the pension lifetime allowance.
  • Premiums paid for by the employers will be treated as a business expense for tax purposes, so long as they follow and adhere to the “wholly and exclusively” test.
  • Premiums that are paid are not part of the employee’s annual allowance, which is the amount that can be contributed to or be on behalf of the employee to any pension scheme for the benefit of tax relief. 

Who Is Best Suited For A Relevant Life Insurance Policy? 

Relevant life insurance is a tax-efficient way of offering life insurance cover to employees, including company directors, who work for businesses that may find they are too small to qualify for a group death-in-service scheme. This insurance policy is also useful for high earners who want to have more coverage than a death-in-service benefits policy provides, or for those who have a substantial pension fund.

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