Guide To Relevant Life Insurance
Relevant Life Cover
Relevant Life Insurance is a cost-
effective personal life insurance
policy offered from an employer to
an employee.
If the employee dies or becomes
terminally ill during their
employment, the lump sum is paid
directly to the employee’s family or
financial dependents rather than to
the business.
Who Is It For?
Relevant Life Cover is single-life cover that can be
offered to individual employees. It is available for
owners, directors and shareholders if they are
salaried employees.
It is an attractive benefit offered to employees
which doesn’t count towards annual or lifetime
pension allowances. Therefore, employees with
sizeable pensions don’t have to worry about
incurring higher tax charges if they were to die
before retirement.
What Makes It Different?
Relevant Life Plans are similar to
most other types of life cover, except
that it is tax efficient for both
employers and employees. Therefore,
a Relevant Life Plan is a cost effective
way for an employer to offer a ‘death
in service’ benefit.
Relevant Life Policies should be
set up within a discretionary
trust with the employee’s
trustees until the end of the
policy. This helps to ensure there
is no inheritance tax on payout.
Business Life Insurance
The plan is designed to provide life cover for an
employee whilst they are employed and the payment
will be distributed if the employee dies or becomes
terminally ill during the length of the policy.
As a Relevant Life Policy is paid for by the business, it is
eligible for tax relief and therefore, savings can be
made on national insurance, income tax and
corporation tax.
 Who Can Apply?
Relevant Life Cover can be offered to a UK resident
and an employee of a UK resident business
including limited liability partnerships, a limited
company or a charity.
All Salaried Employees
Relevant Life Cover can be offered to individual
employees including directors and owners if they are
salaried employees. Shareholders are not normally
eligible if they are not on the payroll. In other words,
Relevant Life Plans are not available where there isn’t
an employer-to-employee relationship. This includes a
sole trader, equity partners of a partnership or equity
members of a limited liability.
In a limited liability partnership, on the other hand,
employees can receive Relevant Life Cover. It is the
partners themselves that can’t if they are equity
members. Salaried company directors and
partners are eligible
Death In Service
It works best for directors wishing to provide a ‘death in
service’ benefit without taking out a scheme for all
employees. As the policy is a single-life policy it can be taken
out for each individual employee.
During An Employment
A Relevant Life Plan is designed to provide life
cover whilst the employee remains with the
business. The payment is then distributed if the
employee dies or becomes terminally ill during
their employment with the company. The
individual who is covered must remain an
employee of the policyholder in order to qualify.
When An Employee Leaves
When an employee leaves, there are two options they
can take if they wish to keep their policy. With both
options there is no need for further medical evidence
or for the policy to be underwritten again if this is
done within a certain timescale. The employee can
either transfer the policy to another employer. The
employer will then pay the premiums and the policy
will still benefit from the tax-efficient benefits of a
Relevant Life Cover. The other alternative, is for the
employee to take over the payment of the
premiumsthemselves. Relevant Life status will no
longer apply, but a trust may continue to provide the
same inheritance tax benefits
 Key Features
Tax Efficient
Relevant Life Cover is set up and
No Inheritance Tax placed into a discretionary trust
As the benefits are not part of the by the business and therefore
individual’s estate when the pay- qualifies for income tax, national
out is made the family do not insurance and corporation tax
have to pay inheritance tax. relief

Single-Life
Relevant Life Cover is a single-life
Business Premiums policy for an individual employee.
The premiums are paid for by the It only remains in place whilst the
business, rather than by the employee remains with the
employee. The policy is company. However, it can be
transferable too. transferred should the employee
leave.

Family Protection Placed In Trust

Relevant Life Cover is designed To benefit from tax efficiency, the
to protect the family of the policy must be written into a
individual’s lifestyle and provide discretionary trust with trustees
financial support. and beneficiaries.

Lump Sum Paid Recruitment Tool

Should the individual die or As a tax-efficient benefit, it can be a
become terminally ill, the great tool in recruitment and
beneficiaries receive the lump retention of high-calibre employees
sum pay-out.
 Benefits
Why
Only 28% of businesses have heard of a Relevant
Relevant Life
Life Plan, according to Legal and General, 2017.
Despite this, Relevant Life has a number of
Cover?
benefits that both the business and employers can
take advantage of.
Attract Staff
Relevant Life Cover can help to attract Peace Of Mind
quality staff that remain loyal to the A Relevant Life Policy does not count
business. It’s a competitive benefit offered towards an individual’s estate. Therefore, it
that also is cost-effective for the business. provides more financial support should the
worst happen. This gives added peace of
Single -Life Policy mind to both the employee and their family

Relevant Life Cover is a single-life policy

taken out for one individual. Therefore, you
don’t need to take out a group policy and
each policy is written individually.
Cost Effective
Due to being placed in a trust and paid for
by the business, Relevant Life Cover is
eligible for certain tax benefits including
Add-On To Pension
The policy also doesn’t count towards annual or
corporation tax, income tax and national
lifetime pension allowance. Therefore, if the
insurance.
employee were to already have a sizeable pension,
they can avoid paying high taxes if they were to die
before they retired. This provides additional support
for the beneficiaries when they need it most
 Tax Benefits
Often, company directors and employees will
take out their own personal life insurance.
However, nearly all of these will be paying for
their life insurance personally through their
gross income or through their company.
However, this is normally subject to a benefit-
in-kind tax payment. Relevant Life Cover
makes it possible for Limited Liability The Tax
companies to pay for life insurance for their
employees, without having to pay extra tax.
Benefits
Of Relevant
Life Cover
Income Tax
The premiums are paid for by the employer,
but it is not treated as employee income or as
a benefit in kind. Therefore, the employee
won’t need to pay income tax on the
premiums. Any pay-out in the event of death is
also free from income tax.
National Insurance
Both the employer and the employee avoid
paying National Insurance contributions on a
Relevant Life Policy. No National Insurance is to be
paid on pay-out either.
Inheritance Tax
Relevant Life Cover is placed into a
discretionary trust and therefore does not
count towards the employee’s estate. This
means that should the individual die, the
family do not have to pay inheritance tax on
the lump sum paid out. There may be
inheritance tax within the trust on some
occasions. On the whole, inheritance tax is not
required to be paid on a Relevant Life Policy.
Corporation Tax
The business will benefit from
corporation tax relief so long as the
premiums are paid wholly and
exclusively for the purposes of the
business. It then becomes an allowable
expense for the employer.
Pension
A Relevant Life Plan should not incur a Pensions
Lifetime Allowance charge because under the
current tax rules its premiums and benefits do not
count towards the annual or lifetime pension
allowances. Employees with higher pension funds
can avoid potentially paying higher tax charges
on their pension fund if they were to die before
they retire.
 Discretionary Trust
A Relevant Life Plan must be placed into a trust. This trust is a legal arrangement allowing the policy to be given
to a trusted group of people (Trustees) who then pass on the policy proceeds to the beneficiaries that the
employee has chosen. The beneficiaries are usually close friends or family such as a spouse or children. It can
also be the employee themselves in the case of a terminal illness.

The trustees are the legal owners of the policy and help to distribute the funds when the employee dies. They
must act in the best interests of the beneficiaries and treat them equally. They must also ensure that all relevant
tax is paid when the time comes to make a claim. At Business Cover Expert, we offer a free trust service to all our
customers so any policies are easily placed in trust without any complications.

Why Does It Need To Be Placed In Trust?

It is a legal requirement for a Relevant Life Plan to be placed into a trust. This is
legislation set by HMRC because Relevant Life is a tax-efficient policy. Placing your
Relevant Life Plan into a trust has lots of benefits such as:

Minimising inheritance tax by ensuring that it is not part of the estate of the
individual covered.
Having a quicker payout as the processes to whom the money would go to are
already in place. Since the trustees are already the legal owners of the policy, the
lump sum can be paid directly to them.
Controlling the funds when the money is paid out. It can ensure that children
receive financial support but do not have full access to it.
Flexibility of choosing beneficiaries. A trust allows the individual to choose who will
benefit from the policy and how much they will each receive.
 Business Cover Expert
Business Cover Expert was established to provide
advice and guidance to organisations and
businesses to protect themselves, their shareholders
and their managers from the financial impact of the
loss of key members of staff.
We offer advice on business insurance products
including Relevant Life Cover, Key Man Insurance,
Shareholder Protection and Partnership Protection
so you can get the right protection for your business.
We provide a range of options that can offer full
cover should the worst happen, such as losing a
critical member of staff or shareholder.
What We Do
Our team of specialist business advisors have in-
depth knowledge of the industry and the best
products on the market. We work with all types of
businesses to make sure that we get the right cover
that suits you.
We’ll not only help you to understand what products
will help to protect your business, but also ensure
that you can continue to operate smoothly as a
business should an unexpected event of death
occur. We tailor the amount and length of policy to
your exact business needs so that you can get the
protection that’s right for you.