Relevant life insurance is a comparatively new variety of insurance that is gradually garnering popularity among high-earning employees and directors of companies that don’t qualify for group life insurance cover. Under a relevant life cover, the beneficiaries or family members of the insured individual receive the payout when the policyholder passes away before the completion of the policy term. This is a special facility which can also be termed as a death-in-service benefit. Nonetheless, in order to become eligible for a relevant life cover, a company should have at least five employees.
The most important benefit offered by a relevant life cover is the tax benefit. There are other advantages of choosing this cover as well.
How To Go For A Relevant Life Insurance Policy
1) Use the Internet and talk to a tax professional
You will get a bird’s eye view about this cover when you look for relevant information about this policy with your favorite search engine. However, since this is a quite new entry into the insurance sector, you will not find many people who have opted for this cover. Therefore, it is advisable that you seek guidance from a tax professional and he will be the ideal person to tell you whether you require it and how much tax benefit you will get out of it.
2) Establishment of a Trust
As soon as you make a decision for setting up a relevant life insurance cover, a trust is established by the employer. There can be one trustee or more than one trustee and your employer has to be a trustee. Insurance professionals always recommend that there should be more than one trustee since if the trustee passes away, there will be certain difficulties in processing the claim. If you are not somebody who’s offering this benefit to an employee only as a medium to make the most of the tax benefits, then you can authorize a “Letter of Wishes”. This letter will vividly specify your wish or how you desire the beneficiaries to use the proceeds. More often than not, there is a possibility that your desire will be fulfilled since you have a trustee appointed. Therefore, it is highly beneficial.
3) Do your research right and always compare policies
Despite the fact that there is a plethora of carriers that offer relevant life insurance policies, it is always better that you compare a number of policies and do comprehensive research prior to picking one. If possible, discuss your needs and situation with an insurance professional.
How is a relevant life cover advantageous for you?
The biggest advantages of this cover are as follows:
- In this type of cover, the employer pays the premiums on behalf of the employee and therefore, they are not taken into consideration for the National Insurance contributions
- of the employer or employee
- The benefit of tax exemption is there for the employees since it is not regarded as a benefit in kind
- If the local tax authorities are satisfied that the cover can be incorporated under the “wholly and exclusively” guidelines, then the payout that the employer offers can be itemized as an allowable trading expenditure in a tax-exempt manner.