Opinion piece by James Leckie
A new specialist website has launched to help UK limited company directors understand relevant life insurance and whether it could be suitable for their business.
Relevant Life Insurance has been created as a dedicated information resource for company directors and small business owners looking at ways to provide life cover through their business.
Relevant life insurance is an employer-funded life insurance policy designed to provide death-in-service style cover for an individual employee or director.
Unlike a normal personal life insurance policy, the premiums are paid by the employer. Where the policy meets the relevant conditions, the premiums can usually be treated as an allowable business expense and do not normally count as a benefit in kind for the employee.
That can make relevant life cover particularly attractive to directors of small limited companies who may not have access to a traditional group life insurance scheme.
A dedicated resource for company directors
The new website explains how relevant life insurance works, who can take out a policy and the tax treatment of premiums and benefits.
It also covers some of the practical questions directors are likely to have before taking out cover, including how much cover may be available, who can be insured and what happens to a policy if someone leaves the company.
The site includes guides to relevant life insurance providers as well as information aimed specifically at contractors, consultants and owner-managed businesses.
Visitors can also use an eligibility checker to get an initial indication of whether relevant life insurance may be appropriate for their circumstances.
Helping directors understand a relatively unknown benefit
Relevant life insurance has been available for many years but remains less widely understood than personal life insurance or workplace pension schemes.
For the owner-director of a small company, however, it can provide a way for the business to fund life cover without the premiums normally being treated as additional taxable remuneration.
As the founder of Relevant Life Insurance, I want to stress:
“A lot of limited company directors are still paying for life insurance personally without realising that relevant life cover may allow their company to provide the protection instead. The aim of the site is to explain how it works in plain English, including the tax rules, eligibility requirements and the things directors should think about before taking out a policy.”
Tax treatment is an important part of the decision
The tax advantages are one of the main reasons directors consider relevant life insurance, but policies need to be structured correctly.
Broadly, qualifying premiums paid by the company will not normally be treated as a taxable benefit for the employee, while the company may be able to claim Corporation Tax relief where the cost is incurred wholly and exclusively for the purposes of the trade.
This is one area where getting the structure right matters. Accountants who work with owner-managed companies are often involved in helping directors understand how company-funded benefits fit alongside salary, dividends, pensions and other business expenses.
David Townsend of Limited Company Help said:
“Relevant life insurance can be a useful option for company directors, but it should be looked at in the wider context of how the company is run and how the director is remunerated. The tax treatment can be attractive where the conditions are met, but it is important that the policy is set up correctly and that directors understand how it fits with the rest of their financial planning.”
Benefits are normally paid through a discretionary trust rather than directly into the employee’s estate.
The exact treatment will depend on the circumstances and the policy meeting the relevant legislative requirements, so directors should take appropriate advice before arranging cover.
Growing interest in company-funded protection
Relevant life insurance sits alongside a growing range of company-funded benefits available to owner-managed businesses.
For small companies in particular, it can offer a way to provide life cover without setting up a full group scheme.
The launch of the new site gives directors a dedicated place to research the subject, compare the main options and understand the tax and practical considerations before seeking a quote.
Author bio:
James Leckie is an economics graduate who worked in finance and business analysis roles before founding a series of popular business news sites. He is the editor of ITContracting.com and ByteStart.co.uk and has been publishing expert content on contracting, tax, and small business issues since 1999. Connect with James via LinkedIn,
Author Profile
- Informed content writer and creator in the UK, always on the lookout for new stories, developments and trends to share.
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