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Why Company Directors Love Relevant Life Insurance

Relevant Life Insurance

Following the success of our article about Relevant Life Policies in May we have had a number of discussions with clients and their accountants. With many similar questions it is a good opportunity to go through some of the key areas of this type of life cover and how it can benefit you.


A Relevant Life policy is suitable in many situations but there must be an employer/employee relationship. Directors of a company, including shareholding directors, are also treated as employees for this purpose, however, partners, LLP members and sole traders are not employees.


Company directors paying 40% personal income tax could save up to 52% on their life insurance premiums (up to a 36% saving for those on a 20% tax rate) when compared to having personal life cover in place. This means that someone with a £50 a month personal life policy could save £7,800 over a 25 year term by taking out Relevant Life cover instead.


Relevant Life Insurance is the same in essence as the most common types of life cover sold in the UK – level term and decreasing term life cover – in that it pays out a lump sum benefit if the person covered passes away within a set period. However, the difference with a Relevant Life Insurance policy is that it is paid for by your business, meaning it is eligible for tax savings.


The premiums are tax deductible as a trading expense, and because they are not treated as a P11D benefit there aren’t any implications on the amount of personal tax you pay, the benefits are also paid tax free.


Regular review of your life cover is always important so get in touch with Scott at Sabre Financial on 01548 856444 or email scott@sabrefinancial.co.uk to discuss how he can help save you money on your life insurance.

 

 

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