The Team
Relevant Life Policy versus
Personal Life Policy
The following calculations demonstrate the difference in cost between a personal life insurance policy and a qualifying relevant life policy.
Tom is a company director (business owner) and is comparing life insurance through the business as opposed to buying it personally.
Both policies are for £1 million for the same term, ending at age 75. The cost of the premiums for each of these types of plans are identical, as we would expect from most providers.
You will often read that Relevant Life Plan are "cheaper" than personal cover; in fact they are not, they're usually the same cost. But the savings are made simply by having the right policy in place which qualifies for all the tax savings that are available.
Personal Life Policy
£1million cover until age 75
ANNUAL PREMIUM £1000
Gross earnings Required to pay premium £1724.14
Employee National Insurance Paid £34.48
Employee Income Tax Paid £689.66
Employee net pay (£1000)
Employer National Insurance Paid £237.93
Corporation Tax Relief Granted -£392.41
Net Cost to business owner £1569.66
Relevant Life Policy
£1million cover until age 75
ANNUAL PREMIUM £1000
Gross earnings Required to pay premium N/A
Employee National Insurance Paid N/A
Employee Income Tax Paid N/A
Employer National Insurance Paid N/A
Corporation Tax Relief Granted -£200.00
Net Cost to business owner £800.00
Total difference of £769.66 per year compared to the personal plan shown, equivalent to a 49.03% cost saving
Tax Efficient
You can see from the example above that there is a significant difference in cost depending on how one arranges life insurance.