The relevant life cover is a life insurance policy which allows a company to pay a lump sum amount of money to its employee in case of death during service. The employees covered under this policy include new employees to directors. It is a tax efficient life insurance policy and the company sets it up and the payout is tax-free. The lump sum payment can be released not only on death but also during severe injury or illness. The pay can go to the employee or any family member who was financially dependent on the employee. Here are all the details you need to know about Relevant Life Policy.
Who Should Opt For This Policy?
This policy is applicable to all those small businesses that are not large enough to form a group life scheme that most of the big companies opt for instead of relevant life cover. Even big companies can opt for it only for their highest earning employees provided they can exceed their pension lifetime allowance. It is also applicable for those who are already in group life schemes and they want to top up their benefits unless of course, the group scheme is not that restrictive.
A Relevant Life Policy is generally applicable to all those employees who are under 75 years of age. It is not applicable to people who are not in the employer to employee relationship. Such category of people includes sole traders, business partners and likewise.
Policy Features and Benefits –
The amount paid in this policy falls under tax-deductible expense in the balance sheet. The premium payment can be paid as per convenience like monthly, quarterly or annually. The benefits provided to the employees or their family members are free from inheritance tax. This policy is providing the employees a cover other than what is being covered by the compulsory pension scheme. It does not form a part of lifetime allowance as death benefits. As a matter of fact, the premiums are not a part of the annual allowance of the employees.
The sum assured in a Relevant Life Taxation Rules is in terms of multiple of remuneration. For example, a company director’s sum assured in a relevant life cover can be based on his salary, bonuses, and dividends. These parameters for consideration vary from cover providing companies to companies and it can also take the age of the employee into consideration. Generally, it varies from 10 times to 25 times.