Provide a valued staff member with
relevant life cover and simultaneously enjoy
the tax-efficient benefits of these policies

Relevant life cover is a type of death-in-service policy that businesses can take out to cover one of their employees. It will pay out to the employee’s family should they pass away while remaining employed by the business.

The policy is taken out by the business which also pays the ongoing premiums. It’s an alternative to group life insurance which is used by businesses to provide cover for multiple staff members at once.

Aside from the obvious benefits to the employee, there are tax-efficient benefits to both parties, such as:

• Employees don’t pay income tax or IHT on any payout
• They’re excluded from pension lifetime allowances
• They’re not treated as a P11D benefit by HMRC
• No National Insurance is paid on premiums
• Premiums can even be treated as a trading expense (can be challenged)

However, these plans must not be used for tax avoidance. 

Relevant life cover is taken out by a business as a type of death-in-service policy for an individual employee. The business pays the premiums. If the employee was to die while still being employed by the business, the employee’s beneficiaries would receive a lump sum payment. This payment can help with the ongoing financial commitments of the beneficiaries, as well as immediate costs, such as funeral expenses.

A discussion must be had with the employee to determine the level of cover required by the policy. This includes but is not limited to:

• The employee's dependents and their financial needs
• The employee's outstanding debts and liabilities
• The employee's future earning potential
• The employee's role in the company

Further considerations will need to be made concerning coverage limits, waiting periods before the cover is active and any policy exclusions that may be in place. 

There are benefits of using an adviser to source relevant life cover. An adviser can assess the employee’s circumstances to make sure only the most suitable policies are considered. This prevents a situation where the policy chosen doesn’t meet business expectations. They can also fully explain the tax benefits of this cover for businesses and answer any outstanding questions you may have.

We encourage business owners to schedule a consultation with a Taylor James financial adviser today. Our team are experienced in helping businesses identify and secure the relevant life cover that meets the business and employee’s needs.