Glossary · UK
What is Relevant Life Insurance?
A tax-efficient death-in-service style life insurance policy that a company can take out for an individual employee or director, often used by small businesses without a group scheme.
Full Definition
Relevant life insurance is a type of individual term life insurance that a UK employer, rather than the employee, takes out and pays for on behalf of a named employee or director, designed to give small businesses -- which often cannot access or afford a group death-in-service scheme -- a similarly tax-efficient way to provide life cover. Premiums are usually an allowable business expense for Corporation Tax purposes, are not normally treated as a P11D benefit-in-kind on the employee, and do not count towards the employee's own pension Lump Sum and Death Benefit Allowance in the way that some other death benefits can, because the policy is written into a discretionary trust from the outset so any payout goes directly to the employee's family or beneficiaries, bypassing both the employee's estate for Inheritance Tax purposes and the delay of probate. It is typically used by directors of small and medium companies, contractors working through their own limited company, and higher earners for whom the tax treatment of an individually-owned life policy (funded from taxed income) or a large group scheme would be less efficient. Cover normally ends automatically when the person leaves the company or reaches a set age, since relevant life insurance is tied to the employment relationship rather than being a portable personal policy.