Moneytree Wealth Management
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Relevant Life Plans

This type of cover pays out a lump-sum if one of your employees passes away or is diagnosed with a terminal illness while working for you. The lump-sum is usually tax free and won’t come out of the employee’s pension pot.

Relevant life cover is ideal for companies with a small number of employees. It means you can cover them individually without the expense many group life insurance schemes come with.

These ‘death in service’ type benefits are popular with employees because they know their next of kin will be looked after financially if anything happens to them.

How does it work?

Each employee will have a set level of cover assigned to them (usually a multiple of their salary) that’ll determine how much their lump-sum payment is. These fixed policies are known as level cover. You can also link them to inflation, so the premiums and amount of cover goes up as the rate does.  

Sometimes it’s possible to increase the level of cover for employees if they have a life-changing event, like getting married, having children or moving to a more expensive property. Policies where you can do this are known as ‘guaranteed increase’ cover.

All premiums are paid by the business and are held in trust. When an employee dies or is diagnosed with a terminal illness, the trustees pay the money out to the beneficiaries named by the employer.

Things to think about

  • Relevant life cover only covers individual employees, not groups of people.
  • If an employee leaves, the cover can continue as a personal life assurance plan and the plan holder becomes responsible to pay the premiums personally.
  • Premiums are classed as a tax-deductible business expense.
  • Employees usually have to be 18-75 to be covered.
  • Less restrictive than group life insurance.

If your business has a large workforce or you think you’ll be increasing staffing levels soon, group life insurance might be a better option.

To talk to us about relevant life insurance for your business, please get in touch.  You can call us on 01244 47010  or send an email to: . Alternatively, give our pop-up form on the right of this page a try.

Tax treatment varies according to individual circumstances and is subject to change.

Linford Brown

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