A guide to Relevant Life Cover
Relevant Life Cover in an insurance policy that allows companies to offer a death-in-service benefit to its employees (including salaried directors) in a tax efficient way. Once set up by the company, the relevant life cover policy will pay out a tax-free, lump sum on the death (or diagnosis of a terminal illness) of the person insured. The employee’s family or financial dependents receive all of the proceeds.
Relevant life cover features
- Counts as a tax-deductible business expense
- Monthly premiums
- Premiums are guaranteed
- Benefits are normally free from inheritance tax
- Maximum amount of cover is capped at £10million
- Must be written into a discretionary trust
- There is no cash value at any time
- If your client stops paying their premiums, the related cover may end
- Once the plan has been issued, it cannot be changed
- Claims will not be paid if the person covered dies as a result of intentionally taking their own life within the first 12 months of the policy
Who Relevant Life Cover might benefit
- Businesses that are too small for a group life scheme
- Employees who might exceed their personal pension lifetime allowance.
- Members of group life schemes who want to top up their benefits as some group life schemes can be restrictive.
The person covered must be a UK resident and an employee of a UK business and cover must stop by age 75.
Relevant Life Cover is not available to sole traders or partnership companies and must be written in a discretionary trust.
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