A Relevant Life Policy is a way of paying for your own life insurance, tax efficiently, through your business.

Rather than pay for life insurance out of your post-tax earnings, this is a way of arranging life insurance so that the company pays the premiums; with potentially large tax savings.

How does a relevant life insurance policy work?

You may be familiar with the term ‘death in service’. These schemes are usually only available to larger firms and are called ‘group schemes’. The tax treatment of these schemes make them attractive to employers, because the premiums are an allowable business expense. Similarly, they are a not a benefit in kind to the employee. On claim, the sum assured is paid to the employee’s family tax free.

Until quite recently those who work in smaller firms couldn’t offer death in service benefits tax efficiently, as they didn’t have enough employees to set up a group scheme. The cover had to be bought personally. This meant paying for life insurance out of your post tax earnings.

Recent legislation has been uncovered to offer the same tax treatment to single life insurance policies, and so the relevant life policy was born.

The life insurance is really no different to a traditional life insurance policy. However, it is owned and paid for by your business. If you die, and the policy pays out, the money is paid to your family via a Trust. The business does not receive the money.

The cover is not only available to you as the business owner, but to other members of your team who you would like to offer a death in service benefit to – without the need for a group scheme.

Contact Hollybeck today for more information.

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