Tuesday, January 29, 2013

All About Relevant Life Policy

Relevant life policy is a kind of life insurance policy that has been breaking out on the market for over last 12 months. This insurance policy is typically designed to give directors and employees tax efficient life insurance policy which can be paid by a Limited Company with the beneficiary being a named person. In other words, it is an insurance proposed by an employer on the life of an employee to provide death in service benefits. This kind of insurance plan is restricted only to provide life cover and is not allowed to cover critical illness or income protection. 

Suitability of relevant life insurance policy:


A relevant life insurance policy is suitable for any employee, including a director of a limited company, provided that they are a schedule e-tax payer. This kind of insurance policy is suitable for small businesses that do not have abundant employees to warrant registered group life scheme. However, group life providers will not usually offer schemes to businesses that have less than 5 employees. But even if they do, they are not allowed to offer a registered scheme on single life basis. Therefore, it can be said that many small businesses are barred from enjoying the advantages of relevant life insurance as enjoyed by large businesses.

Registered group schemes come under pension legislation's and thus, lump sum benefits are added to the employee’s pension fund on his or her death. Hence, certain high earning employees are also fit for this relevant life insurance. 

Advantages of relevant life insurance:


Premiums of relevant life insurance policies are usually paid by the employers but are not treated as the income into the hands of the employees. While the plan is qualified as a relevant life policy, by meeting the legislative requirements, no charge will be made for income tax on the premiums given by the employee.

A few important conditions in order to qualify as a relevant life policy:

Now let us take a look at some of the important conditions in order to qualify as a relevant life policy –

  • One of the most important conditions to qualify as a relevant life policy is that the plan must be able to provide a lump sum on death before the age of 75. 
  • This kind of insurance plan can only provide benefits on the death of the employee. Critical illness benefit, disability income benefit or any such benefits cannot be provided by the relevant insurance policy. 
  • The policy usually cannot have a surrender value. This is not an issue with self assurance as it is term assurance plan. Hence, this will not acquire a surrender value. 
  • With relevant life policy, benefits are paid either to an individual or to a charity and this can be paid through a trust. There are many insurance companies that issue relevant life policy under a discretionary trust. 
  • Relevant life policy is usually tax-free. However, the main purpose with this policy should not be tax avoidance. HM Revenue and Customs (HMRC) guidance indicates some tax avoidance situations where less tax is paid than Parliaments intended, or more tax would have been paid if Parliament had turned its mind to the specific issue in question. 

However, if you are hunting for relevant life policy, search around well in order to obtain it from a legitimate insurance company. Bright Grey Relevant Life Policy would be a viable option for you that offer a list of benefits such as unique individual stand-alone cover, tax advantages for high income group, premiums not taxed, cover 15 times annual salary for clients aged over 40 years or so.

Author’s bio: Sam Payn is a well-known blogger, who loves to write articles. He has contributed a plenty of articles on finance and insurance related to different blogs. He has written on how to obtain life insurance, things to consider when going for relevant life policy, relevant life tax advantages and many others. 

Image Credit: http://www.flickr.com/photos/90486418@N04/8383483412/

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