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Relevant Life Policy

A Relevant Life Policy is a tax–efficient form of life insurance.
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What is a Relevant Life Policy?

A Relevant Life Policy is similar to a life insurance or a death in service benefit. Basically should an individual pass away during the length of the policy, a lump sum could be paid to their family or dependents. One of the main differences between the two policies is that a Relevant Life Policy is more tax efficient, as well as being a major incentive or benefit for employed staff members.

A Relevant Life Plan is paid for by the business or company but covers the individuals they employ. This means that not only does the company offer this as an employee benefit but also it is also considered a legitimate business expense and is therefore tax deductible.

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Who benefits from Relevant Life Cover?

Despite being taken out and paid for by the individual's employer the policy pays out to the family or dependents left behind should an employee death occur. The company itself does not benefit from this policy directly. Relevant Life Cover is legally written in trust, which ensures that the money is issued to the named receiver. This type of policy means that the lump sum is also issued as tax-free.

All premiums paid to a Relevant Life Policy by a company or organisation fully qualify for exemption from tax, this includes Income Tax, National Insurance and Corporation Tax. Purchasing this type of policy saves money when compared to a standard Life Insurance policy. Also it is legally written into trust so is not subject to Inheritance Tax and is not considered a taxable sum at all. So not only does this type of policy ensure most cost effective benefits for businesses but also provides for their employees' dependents when they need the most support.

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Frequently asked questions - Relevant Life Policy

Please drop us a message if you have any queries. Here are the most commonly asked questions about Relevant Life Policy.

What is a Relevant Life Policy?

A Relevant Life insurance policy is taken out by a company or organisation to provide a death in service benefit for an employee. Despite being paid for by an employer the policy pays out directly to the employee's beneficiary when relevant.

Who owns and pays for a Relevant Life Policy?

This type of policy is owned and paid for by an individual's employer, whether they are a Limited Company or a Limited Liability Partnership. The company or organisation pays the required premiums on the insurance for the length of the term. However, when a claim is made the policy pays out to the beneficiary named by the individual employee.

What is the Cost of Relevant Life Policies?

There is very little difference between the premium cost of a Relevant Life policy and typical Life Insurance. The major difference between the two is that Relevant Life policies are bought and paid for by a company or organisation, as opposed to typical Life Insurance which is paid for by an individual. There are certain tax advantages to a company providing this death in service benefit, which are as relevant to the organisation as to the employee themselves.

How quickly can a Relevant Life Policy be set up?

As with most Life Insurance policies a Relevant Life policy is required to be underwritten and witnessed by third parties. There may also be the question of the employees' health and time may be required to request and receive medical reports from GPs or specialists. Due to the varying factors it can take anything from a few days to a month or two for the policy to be finalised and take effect.

How much should an Individual be Covered for?

As with Life Insurance policies there are several factors to take into account when deciding upon the amount of cover to supply or offer. This can be entirely dependent upon the individual employees' situation. They should think to calculate the cost of any outstanding mortgage, debt and the daily living cost of their family members or dependents who will be in receipt of the pay-out. The organisation will also be involved in the decision making process as they are bound to pay for the cost of premiums.

How long should the Relevant Life Policy Term be?

This is much the same as other Life Insurance in that the term can be taken out as a "whole life" policy or in specific terms, such as five years, ten years, etc. There may be changes in cost to consider if a Relevant Life policy is taken for specific term periods as there may be changes in health status, and therefore cost, as an employee ages. It is important to note that a policy can be transferred to a personal product should the employee leave the company before a claim is made.

Does Relevant Life Insurance include Critical Illness Cover?

Unfortunately, Critical Illness cover cannot be included in Relevant Life policies. There are specific rules around this type of insurance and the tax relief, or benefit, to the purchasing company, so additional cover is not permissible.

What are the Benefits to an Employer for Providing Relevant Life Cover for Employees?

Relevant Life cover not only provides an important benefit and incentive to individual employees but it also means the company purchasing the policy can define this as a business expense. As such this means that any Relevant Life policies are considered as tax deductible. This type of policy is also held in a trust so cannot be considered a company asset or part of the estate. Further information regarding the taxable status of policies is dependent upon current legislation.

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