Who is relevant life insurance for?
Protecting your loved ones’ future is one of the most common motives behind taking out a life insurance policy, but it’s worth knowing that not all policies are the same. If you’re eligible, some types of life insurance may be better suited to your circumstances than others, helping you to save money on premiums and ultimately get the kind of cover you need.
If you’re affiliated with a limited company – for example, you own a business or are a director, contractor or employee, then it’s a good idea to look into business life insurance as well as or instead of personal policies.
One type of business insurance that can be very beneficial to both the individual covered and the company itself is relevant life cover. As well as offering a lump sum payout if you were to pass away during the term of the policy, relevant life makes it easier for you to cut costs and save money on your insurance. The premiums, paid through the business, are usually tax-deductible, which can make them more affordable for everyone.
Can you get relevant life for directors?
If you’re a company director, you can take out relevant life insurance for yourself, or your company can take it out on your behalf. The premiums on relevant life policies are cheaper for most people as they are viewed as an allowable business expense by HMRC.
Relevant life cover can also be beneficial if you intend to recruit for director-level positions, particularly for small businesses. While smaller businesses might struggle to keep up with their larger competitors’ pay and benefits packages, relevant life insurance can be a great benefit option. Since the premiums are cheaper, businesses can effectively offer greater cover for a lower price – an attractive proposition for potential employees. And because relevant life insurance is underwritten on a case-by-case basis, larger companies with more employees are much more likely to opt for a more expensive group option that doesn’t need to be underwritten.
Can you get relevant life for contractors?
As they aren’t permanent employees, contractors don’t always have access to the same employer-provided benefits that these employees enjoy. This can make it hard for them to take advantage of business life insurance schemes and get cover in place to look after their loved ones if they pass away – but relevant life insurance is an exception.
If you’re a contractor working with a limited company, that company can take out relevant life insurance for you in the same way they would for their permanent employees. In the event of your death, the policy would pay out a lump sum to your chosen beneficiaries as long as all the terms of the policy are upheld. This is a great way for contractors to get a comprehensive life insurance policy for less, owing to the tax-deductible nature of the premiums the company will pay.
Can a sole trader have a relevant life policy?
Relevant life is intended to offer life insurance cover for employees of a limited company, whether they are permanent employees, directors or contractors. Unfortunately, this doesn’t include sole traders. Any sole trader who operates as an individual rather than as an incorporated company cannot access relevant life insurance and the benefits it provides.
The reasoning behind this is that relevant life insurance premiums are paid by the business. This is what allows them to be less expensive because they are tax-deductible as allowable business expenses for a limited company. If you’re a sole trader operating as an individual, you can’t separate your business and personal expenditure in the same way. Therefore, you can’t benefit from the same tax efficiencies that relevant life insurance offers to employees of limited companies.
However, this doesn’t mean that you and other sole traders are left without options for life insurance. Being a sole trader doesn’t preclude you from taking out a personal life insurance policy that’s tailored to your individual needs – and while these policies don’t offer the same tax advantages as relevant life insurance, they are nevertheless a reliable way to provide financial protection for your loved ones and dependents.
If you’re sure that relevant life insurance would be the best option for you, then there is another option. Sole traders can transition their business to a limited company structure, thus making them eligible for relevant life insurance and other tax advantages. However, becoming a limited company can also have its drawbacks, so it’s vital to do your research before committing to a decision.
Choose The Insurance Surgery.
Relevant life policies can be a highly beneficial option for companies looking to provide competitive life insurance cover for their employees without having to pay a fortune to do it. To find out if relevant life cover is right for your business, get in touch with The Insurance Surgery today. As well as streamlining the application process for you, our trusted advisers can find you the best deals for cover, particularly if any of your employees are affected by underlying health conditions that can make life insurance more complex.
Data Source: What a sole trader is | Gov.UK
