How does a relevant life policy work?

Relevant life policies are arranged by an employer for the benefit of an employee. They are often based on a multiple of an employee’s salary, and the multiple is normally based on the employee’s age. In the event of a successful claim, the policy would pay out a tax-free lump sum to the employee’s beneficiaries (usually their partner or dependants).

How many employees does a relevant life policy cover?

A relevant life policy will cover one employee. However, an employer can take out individual policies for multiple employees.

Are relevant life policies considered a benefit-in-kind?

Relevant life policies are not considered a benefit-in-kind. They’re generally considered to be an allowable business expense, so employees won’t need to pay income tax or National Insurance on the premiums.

Can a sole director or trader take out a relevant life policy?

No, by definition a sole director or trader is not considered an employee and does not have an employer that can take out the policy for them. A sole trader can take out a relevant life policy for any of their employees.

Can relevant life insurance be used to replace shareholder protection?

Relevant life insurance does not include critical illness cover and is designed to pay out to the estate of the deceased. Shareholder protection, alongside a cross option agreement, is specifically used to enable the remaining shareholders to purchase the shares of the deceased at a fair and agreed price.

Is a relevant life policy payout taxed?

No, lump sum payouts are not taxed.

What age can a relevant life policy run to?

Policies are available for employees between the ages of 16 and 73.

Who is the owner of a relevant life policy?

The employer is the owner of the policy as they pay the premiums.

Relevant Life Insurance | Alan Boswell Group

Name: Relevant Life Insurance
Brand: Alan Boswell Group
Rating: 4.8 (11212 reviews)

Relevant life insurance is set up by an employer and provides a payment to an employee's beneficiaries if they were diagnosed with a terminal illness or dies.

Similar to death in service insurance, relevant life insurance can be more suitable for SMEs (small and medium sized enterprises) that wouldn’t have enough employees to warrant a group scheme.

The Alan Boswell Group Difference

Alan Boswell Financial Planners are one the UK’s leading, truly independent, financial advisers providing a range of flexible employee benefit solutions for businesses.

We can help with all your employee benefits including: Workplace Pension/Auto-Enrolment Schemes, Group Income Protection Schemes, Death in Service Schemes, Critical Illness Schemes and Flexible Benefits

How our customers rate us

A competitive quote was obtained with the cover required for our needs. Good customer service and advice given.

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Relevant life insurance in detail

Relevant life insurance is an employee benefit suited to SMEs. It is a life insurance policy taken out by an employer for specific employees and would pay the beneficiary of the employee a tax-free lump sum if they were diagnosed with a critical illness or died.

Relevant life insurance is tax efficient for both the employee and employer. The employee would not be required to pay income tax or National Insurance on the premiums, with any pay out also being tax free. The policy is considered tax deductible for the employer for the purpose of corporation tax.

The lump sum payment is normally based on the employee’s earnings and the employer can set the multiplier from which the final sum would be calculated.