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How relevant is your Life Cover?

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Everyone wants to feel like their family and loved ones will be looked after when they pass away, but what is a Relevant Life Policy and how is it different to other Life cover plans? We take a quick look at this popular method of protection.

What is it?
Relevant life insurance provides a lump sum pay-out upon the death or terminal illness diagnoses of a company employee and/or its directors. The key difference between this type of policy and a “straightforward” life insurance policy is that premiums are paid for by the company and is potentially eligible to be written off as taxable expense.

Who benefits?
Relevant life plans are designed to pay to the individual rather than to the company; the employer is the actual policy owner, but the individual and their family are always named as the beneficiaries.

How much relevant life cover will you need?
Getting the correct amount of cover is important. Lots of companies will protect employees in terms of salary multiples. For example, someone with 10 years until their retirement earning £40k a year could typically be covered for £400k (10 x £40k).

The insurers can also set limitations on the amount of cover dependent on the income and age of an employee – obviously, a 55-year-old earning £25k per year wouldn’t require a policy for millions of pounds’ worth of cover!

Can self-employed sole traders take out this policy?
Put succinctly, the answer is no. Relevant life is only available when there is an employee/employer relationship and the person covered is salaried by the company. There are other limitations with relevant life policies. Some of these include:

• Policies can only be paid out upon death before the age of 75
• On the whole, Relevant life policies are life protection only, with no critical illness benefits included
• The individual can name beneficiaries, but the final decision on where the funds end up lies with the trustees.

There are other caveats to a scheme like this, so that’s why it’s important to take financial advice. At Clayton Holmes Naisbitt we look at the entire marketplace to make sure you get the appropriate type and level of cover. If you’d like to speak with one of our consultants, then call us on 0113 3878240 or get in touch through the “Contact us” form on our website.

 

Clayton Holmes Naisbitt