Relevant Life Insurance known as RLP or Relevant Life Plan
Updated: Dec 8, 2023
Relevant life insurance is a type of policy that a business can take out to provide life insurance for an individual employee. It's an alternative way employers can provide death-in-service benefits for employees outside of a registered group life scheme.
It's main benefit, life insurance, is the same as a personal life insurance plan, in that, the beneficiaries, i.e., the insured's family or loved ones would receive a lump sum of cash if the insured died during the term of the policy. Unlike personal life cover Relevant Life Plans must be written in trust, ensuring further tax efficiencies and speed of payment by avoiding probate delays.
Company directors can also benefit from this product. Rather than funding the costs of a life cover policy from your personal or post-tax income, your company can fund a relevant life policy.
A sole trader in their personal capacity as a business owner is not eligible to take out relevant life cover, as a sole trader is not a legal entity and cannot get a policy through the business. However, a sole trader business owner can apply for a policy on behalf of an employee, for example, some sole traders would have their wife or husband on payroll as admin or secretary, therefore, they'd be entitled to apply for a relevant life insurance plan on their behalf.
The monthly premiums for relevant life insurance count as a tax deductible business expense. Personal life insurance premiums do not receive tax relief! In addition to tax relief for the business paying the premiums, further tax efficiencies are found as the benefits are not subject to employer national insurance nor employee national insurance. No benefit in kind tax charge applies either, saving the insured further tax.
A common misconception we come across is when a director explains that they already have life insurance, advising they will check with their accountant to sort out the tax relief. Personal life policies do not attract tax relief and accountants generally don't advise on life insurance. Only Relevant Life Plans qualify for tax relief. Do not confuse the two.
Typically the cost savings funding a Relevant Life Plan are in the region of 40% for a basic rate taxpayer, 49% for a higher rate tax payer and as much as 66% for some high earners.
If you'd like to review your policies to calculate how much you could be saving, get in touch.
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