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Relevant Life Policy: A smart life insurance cover

Relevant Life Policy: A smart life insurance cover

Every business owner or the director of the companies has a plan to offer life insurance cover to each of his employees. But providing individual insurance or death in service benefits can turn out to be a bit hectic as well as expensive. As an alternative you can consider opting for relevant life policy which is a special type of life insurance policy, especially designed for those employers who want to provide a death in service benefit to his employers. Even if this insurance cover is relatively newer in the market, it has become extremely popular among the directors of the company, largely due to the huge tax benefits that it offers. So, if you are considering opting for one, you must be aware about its unique features.

 

Binded Relevant Life Policy Document
By Sean MacEntee under CC BY 2.0

 

Facts you should know about Relevant Life Policy

  • This is a term insurance policy, provided by an employer on the life of his employees and it is funded by the employer.
  • According to this policy a lump sum amount of money is payable to the family members on the death of an employee.
  • If the employee changes the job, or retires, he no longer gets to enjoy the benefits.
  • One can extend the term of the policy using the continuation approach. This option allows the employee to opt for a life policy for the same amount of money for the remainder of the term.
  • The delivery of the benefits are payable till the client reaches the age of 75.
  • This policy doesn’t provide any other benefits and does not offer any surrender value. Only the prescribed benefits are paid under this policy.
  • One cannot apply for this policy only in order to avoid tax payments.
  • The employer, who provides these benefits, must be subject to a special relevant life policy trust.
  • This policy is especially designed to meet the criteria of a single life cover.
  • Unlike many other life insurance covers, relevant life policy allows to add a terminal illness benefit or disablement benefit, during the service period of the employee.
  • A discretionary trust is made through which the payment is made to the family members.
  • The benefits should be given to a family member who can assure that the sum is transferred to the right person.

Well, having mentioned the exclusive features of relevant life policy, let’s take a look at the substantial tax benefits, that one can enjoy by opting for one –

  • The premiums of this policy are not paid as benefits in kind and as a result of this they are tax free.
  • Earlier, when a owner of a company or some shareholder wanted to purchase any such policies they had to pay the premiums either from their post tax earnings or from the company’s account. Apart from this, the tax premiums were subject to serious tax burdens. On the other hand the premiums of relevant life policy are paid by the employer in a very tax efficient manner.
  • As the premiums are considered as trade expenses, the employers enjoy certain corporation tax relief.

 

By Sam Payn

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