How to set up Relevant Life Insurance
Relevant Life Insurance is a cost-effective, tax-efficient in-work benefit that can be offered to UK based employees.
Like any other life insurance cover, it includes the payments of either monthly or annual payments into the plan (in this case by the employer) with a lump sum paid to the covered employee’s family or financial dependents in the event of a death in service.
There are lots of Relevant Life Insurance providers, and the value of the cover you take out will be dependent on which provider you choose.
But in terms of setting up Relevant Life Insurance for an employee, the initial assessment and set up follows the same procedure.
If you’re thinking about Relevant Life Insurance for an employee, here’s how you can go about setting it up.
Why set up Relevant Life Insurance?
If you’re a small business owner, you might not have enough employees to qualify for, or need, a group life insurance scheme.
Because Relevant Life Insurance only covers individual employees, it is suitable and beneficial for businesses of all sides.
One of the reasons businesses tend to opt for this kind of insurance is because it is a tax-efficient means of providing life cover to employees.
Setting up your Relevant Life Insurance
Your insurance policy will be set up with your provider on an individual employee and the life of another agreement.
You as the employer will be the policyholder and have responsibility for paying the premiums, and the employee will be named as the person being insured.
Relevant Life Insurance is calculated much the same way any life insurance policy would be, so your employee would undergo an initial assessment to establish basic information like their health, age and other lifestyle factors.
It is vital at this stage that you provide accurate information as any anomaly could impact any future payouts.
The amount of cover you and your employee want to take into account will also be based a few common factors, whichever provider you choose:
- The employees living costs (mortgage payments, for example)
- Their annual salary (and any bonuses for directors)
- Length of the employee's service
The basic setup of the insurance policy will state that it will be a single life policy (you will need to set up a group policy to ensure more than one employee), the employee stated in the plan will be the one covered, you as the employer will be responsible for paying the premiums for the lifetime of the plan, and the policy will be written into a business trust.
Other Relevant Life Insurance criteria you should understand
As well as agreeing on the payment and level of cover you will be taking out, there are certain other criteria you need to agree to when setting up Relevant Life Insurance, such as:
Your employee must provide accurate information during the assessment - and notify the insurance company of any changes to that information during the term of the cover
You must agree on a term limit for the insurance policy and agree that the policy will only cover the employee during that term
The policy won’t incur a surrender value (an amount that is paid out to a policyholder in the event a policy is terminated before any payouts are made)
Setting up a Trust for your Relevant Life Cover
Your policy should be held in a Business Trust, held and paid into by the company with the agreement that the policy will be paid out to your employee’s designated beneficiaries in the policy.
Part of the reason for this is that holding your policy in a trust means it won’t be subject to income tax or national insurance.
Interested in Relevant Life Insurance for your employees?
We’ve been providing business insurance cover to clients for years and we always work to ensure they only receive the best possible deals for themselves and their employees.
If you want to get more information about how to set up a Relevant Life Cover, contact us today.