Relevant Life Cover

A life assurance policy in the name of a Ltd Company which protects the director(s). A tax efficient way to pay life insurance.

Victoria Harbor, Hong Kong

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Relevant Life Cover

Relevant Life cover works in the same way as a standard Life cover policy however, the premiums can be paid through a Limited Company making them a tax deductible expense. Any benefits paid out in the event of a claim are also free from income tax.

For example, in the event of a Limited Company owner’s death, the Life cover will pay out a tax free lump sum to the family (set up as beneficiaries with a trust) to ensure that they can still maintain a general standard of living.  The money received can be used to pay off a remaining mortgage loan, pay for dependents school fees and generally ease financial pressure for the family.

Business protection such as Key Person, Shareholder and Partner protection should also be considered alongside a Relevant Life policy to ensure that the assets and future of the business is adequately protected.

As well as protecting the business owner’s family with a relevant life policy, it is also a great way for smaller businesses to provide protection for some of its employees without setting up a group scheme. The benefit paid in the event of a claim will be free from inheritance tax and not considered part of the employee’s estate for inheritance tax purposes so can be distributed to the employee’s beneficiary’s tax free.

A Relevant Life application will be completed by the employer on behalf of the employee, they will therefore be the policy owner and responsible for paying the policy premiums through the business.

Relevant Life policies can be implemented for all employees of a Limited Company this includes company directors. Partners, LLP members and sole traders are not employees and therefore are not eligible for this type of policy.

If an employee leaves the company, the relevant life policy can be converted to a standard life policy and the premiums could then be paid for by the employee personally. This would mean the premiums are no longer tax-deductible.

If you have a limited company and would like some further information on Relevant Life cover, give us a call today and one of our advisors will be happy to help.

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