PMS Business
Relevant Life Insurance
An employer-funded way to provide individual life cover for an eligible director or employee, subject to policy conditions and current tax rules. It is often considered by directors of smaller companies who are not part of a group scheme.
What is a Relevant Life Plan
A Relevant Life Plan is an individual life insurance policy taken out and paid for by an employer for a specific director or employee. If the person dies during the policy term, the benefit is paid through a trust to their chosen beneficiaries, such as their family.
Who may benefit from Relevant Life Insurance
It may suit directors of limited companies, high-earning employees who would exceed group scheme limits, and smaller employers who do not have enough staff for a group life scheme. It is not available to sole traders or equity partners in a traditional partnership.
Why business owners consider Relevant Life cover
Because the company pays the premium, a director may not need to fund personal life cover from taxed income. Whether that produces a saving depends on the tax rules at the time and on the company's and individual's circumstances.
Relevant Life cover for company directors
A director of their own company can usually be covered, as long as they are an employee of the company and the policy meets the relevant conditions. The company must be able to show the cover is for the director's role as an employee.
Relevant Life trusts and beneficiaries
A Relevant Life Plan must be written in a specific type of trust so that the benefit goes to the person's family or other individual beneficiaries, not to the business. We help with the trust paperwork; the choice of trustees and beneficiaries is yours.
Tax considerations and eligibility
Under current rules, premiums may be treated as an allowable business expense and may not be treated as a benefit in kind, provided the policy meets HMRC's conditions and the local inspector accepts the expense. This is not guaranteed and can change, so please confirm the position with your accountant.
What Relevant Life Insurance does not cover
It provides a death benefit only, and some plans include terminal illness. It does not include critical illness cover, cannot be used to protect the business itself, and has no cash-in value.
Relevant Life Insurance compared with personal life insurance
| Feature | Relevant Life Plan | Personal life insurance |
|---|---|---|
| Who pays | The employer | The individual |
| Paid from | Company funds | The individual's taxed income |
| Who receives the benefit | Beneficiaries through a relevant life trust | Beneficiaries or the estate, or a trust if one is set up |
| Critical illness option | Not available | Usually available |
| If the person leaves the employer | Can sometimes move to a new employer, subject to the insurer | Unaffected by employment |
A general comparison. Tax treatment depends on circumstances and current rules.
Potential benefits and important considerations
Benefits
- Individual life cover funded by the employer
- Benefit paid through a trust to the person's family
- Can sit alongside, or instead of, a group scheme
Things to consider
- Tax treatment depends on HMRC's rules and your circumstances, and may change
- Life cover only — no critical illness option
- Not available to sole traders or equity partners
How it works
Arranging relevant life cover
A straightforward process once eligibility is confirmed.
- 01
Check eligibility
We confirm the person is an eligible employee and that relevant life suits their situation.
Eligibility confirmed - 02
Set the cover and trust
We agree the amount of cover and complete the relevant life trust with you.
Cover and beneficiaries set - 03
Confirm with your accountant
We recommend you confirm the tax treatment with your accountant before the policy starts.
Tax position checked
Ready to take the first step?
Your initial consultation is without obligation. Speak with an adviser in Croydon or over Zoom.
Relevant Life Insurance FAQs
Usually, if you are an employee of your company. Sole traders and equity partners in a traditional partnership are not eligible.
Under current rules the premiums and benefits may receive favourable tax treatment if the policy meets HMRC's conditions, but this is not certain: it depends on circumstances and the rules can change. Please check with your accountant.
No. A Relevant Life Plan provides life cover, and some include terminal illness, but not critical illness.
Some insurers allow the plan to transfer to a new employer if the new employer agrees. Otherwise it ends when the employment ends.
Related PMS Business services
Arrange a Relevant Life Insurance review
Speak to us about your business. Your first conversation is without obligation.
Important information
Tax treatment depends on individual and business circumstances and may change. We do not give tax advice; please speak to your accountant or tax adviser. The Financial Conduct Authority does not regulate tax advice.
Trusts and taxation are not regulated by the Financial Conduct Authority.
Before you proceed we will confirm in writing whether PMS Mortgages advises on and arranges this cover, or introduces you to another firm, and what that firm's role is.