For many business owners and company directors, protecting their family financially is just as important as protecting the business itself. Yet personal life insurance is often arranged without considering whether it’s being funded in the most efficient way. Relevant Life Insurance offers a solution designed specifically for company directors and employees, combining meaningful life cover with potential tax advantages.
What Is Relevant Life Insurance?
Relevant Life Insurance is a type of individual life insurance policy set up and paid for by a company. It provides a lump sum payout to the employee’s chosen beneficiaries if they pass away during the policy term.
Unlike group life insurance, Relevant Life is arranged on an individual basis, making it particularly suitable for small companies, owner-managed businesses, and directors who are the sole or main employee.
The policy is typically written into a trust, meaning the payout goes directly to beneficiaries rather than through the estate.
How Relevant Life Differs from Personal Life Insurance
With personal life insurance, premiums are paid from an individual’s post-tax income. Relevant Life, by contrast, allows the company to pay the premiums on the individual’s behalf.
In most cases:
- Premiums are paid by the company and may be treated as an allowable business expense
- There is no benefit in kind for the employee
- The policy does not usually count towards the individual’s lifetime pension allowance
- The payout is generally free from income tax
- Being written in trust can help avoid inheritance tax
This structure often makes Relevant Life a more tax-efficient option for directors compared to holding a personal policy.
Who Is Relevant Life Insurance Suitable For?
Relevant Life Insurance is commonly used by:
- Limited company directors
- Owners of small or medium-sized businesses
- Contractors operating through their own limited companies
- Key individuals who are not covered under a group life scheme
It is especially relevant for those who take income through a combination of salary and dividends and want to avoid increasing personal expenses unnecessarily.
Is Relevant Life Right for Everyone?
While Relevant Life can be highly effective, it isn’t suitable in all situations. It only provides cover in the event of death or terminal illness it does not include critical illness or income protection. Sole traders and partnerships also cannot usually use Relevant Life policies, as they are designed for limited companies.
Final Thoughts
Relevant Life Insurance is a powerful yet often overlooked option for business owners who want to protect their family while making sensible use of their company structure. For many directors, it offers a straightforward way to secure life cover more efficiently than through a personal policy. If you already have life insurance in place, it may be worth reviewing whether it’s structured in the most effective way. A small adjustment could improve both protection and tax efficiency providing greater peace of mind for you and your family.
You can contact one of our independent advisers for personalised advice and support in making confident, informed decisions by using our Facebook or Contact Us pages, or speaking to a colleague in our office on 01329 562220-Fourtress Financial- www.fourtressfinancial.co.uk
Please note: The content of this blog is for your general information purposes only and does not constitute as protection advice.
Failure to disclose any requested or relevant information may adversely affect the assessment or settlement of future claims.
The current tax-free treatment of policy benefits may be subject to change.
These plans generally have no cash value at any time, and cover will cease at the end of the policy term. If premiums are not paid, the policy will lapse.
