As an employer of a small business if you are paying up huge taxes on conventional life insurance coverage for your employees, you might as well seek the aid of the relevant life policy. It is a life assurance cover with a difference that has a range of tax benefits. As you go through the write up you will come to know more about them in detail. However, at first you should try to gather more information about the way in which the policy works.

How It Works

It’s rather surprising to learn that the cover is yet to be availed by the desired number of users in spite of its range of benefits. Let’s see how it works. The relevant life cover is designed for employers who want to provide a death in service benefit for their employees. However, the employers seeking the cover should be owners of small companies that  don’t have the required number of employees to qualify for a registered group life scheme. The premiums are paid by the employer with the employee being named as the insured. The benefits are paid as a tax free lump sum to the family of the employee after his death. The policy will provide protection only up to the time the employee completes his 75th year. There is no surrender value attached to it and if payments are stopped during the middle of the tenure the cover will be canceled and there will be no refund of money. The benefits are payable through a trust and they are not included within the pension funds meant for high earning individuals.

Tax Advantages

The tax benefits associated with the relevant life policy are discussed below:

The employer is entitled to Corporation Tax Relief as the premiums paid are not considered to be benefits in kind.

The benefits paid out as the lump sum are tax free.

Neither the employee nor the employer has National Insurance obligations.

More About the Trust

The application form related to the Relevant Life Trust is required to be completed by the employer. The trust might as well be required to be set up before the policy is issued. The employer himself is the initial trustee while additional trustees can be included with the help of an additional deed or draft. Generally, the establishment of the Trust implies that future dealings related to the policy would be between the insurance carrier and the trust. However, terms and conditions might vary with different insurance providers in this regard.  

Letter of Wishes

If the insured wants he can draft a letter of wishes indicating when he wants his nominees to get the money. The trust will be considering the contents of the letter while paying out the benefits, though it’s not mandatory (legally) for them to follow what is stated in the letter.

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