Relevant Life Insurance is a form of benefit that employers can offer to their employees, similar to life insurance, that is paid for by the company and paid out to an employee’s family or financial beneficiaries in the case of death.

It can be used by any business for any employee.

Typically it is used for smaller employers when they want to offer some kind of benefit but can’t afford a group scheme.

For larger employees, it is seen as a perk for higher-level employees, like directors.

These employees tend to use Relevant Life Insurance as a top-up when they have maxed their pension lifetime allowance and don’t want to be involved in a group scheme, which could contribute towards their retirement savings.

Like any life insurance policy, a lump sum would be paid to the insured employees’ beneficiaries.

The cover can be for a pre-agreed amount (which pays out in the event of a death) or the policy can be linked to the annual rate of inflation so payments are in line with the cost of living at the time they are paid out, rather than matching living costs at the time the policy was taken out.

Who can be covered by Relevant Life Insurance?

Typically Relevant Life Insurance can be taken out for an employee within a business if they are a partnership, limited liability partnership, limited company or a charity.

Equity partners (shareholders), sole traders and members of an LLP are usually not covered by this kind of policy because technically they’re not classed as employees of the business.

You also can’t take out Relevant Life Insurance on an employee who has gone past their 75th birthday.

If you’re looking for a policy that includes illness and disability protection, these would not be covered by Relevant Life Cover, so you would need to take out a separate policy.

Your agreement must also make it clear that the payments from the policy are payable to the employees’ dependants.

However, your employee must meet certain criteria to be eligible for cover:

  • They must be a UK based employee
  • They must be an employee of a UK based company

How is it calculated?

Relevant Life Insurance is calculated the same way any other life insurance policy would be.

The covered employees would be assessed based on lifestyle factors, age etc and the cost of the cover would be calculated from these findings.

Typically, your Relevant Life Insurance will cover a period of 40 to 50 years for the employee and would automatically end at their 75th birthday.

Once the cost of the premiums is set and the cover is taken out, it will be written into a Trust.

Want to find out more about Relevant Life Insurance?

We can help you and your business review the best options for you and your employees if you’re interested in taking out Relevant Life Insurance.

Get in touch with us and we can guide you through the process and ensure you receive the best possible level of cover for your employee.

Contact us today.

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