Protecting those you love when you’re no longer around, isn’t the easiest thing to think about, but it could be one of the most important conversations you have. Looking ahead gives you peace of mind that the people who matter most will be provided for.
Simply put, all life insurance provides your loved ones with a one-off payment (or monthly payments) should you pass away. It means your family won’t face the worry of paying bills, keeping a roof over their head, or putting food on the table and provides you with control over how your finances will be managed after your death.
If you’re a contractor or director running a limited company, you can enhance your life insurance to become more tax-efficient – this is called Relevant Life Insurance.
The headline benefit is tax efficiency
Relevant Life Insurance is a type of life insurance that is designed specifically for business owners and company directors. It’s a very tax-efficient way for companies to provide death-in-service benefits to its employees.
You can immediately save tax by the business paying the life cover premium. It is not treated as a benefit-in-kind as the premium is not included as a P11D benefit. Instead of providing group life cover, the employer can provide a Relevant Life Policy on an individual basis.
How does relevant life insurance work?
In essence, it moves the cost of your life insurance policy from your pocket to your company expenses, and your business will benefit from lower premiums because of the tax savings.
The policy is paid for by your business. Policy premiums are not subject to National Insurance payments for the employer or employee. The premiums are not treated as a benefit-in-kind (P11) and your business can claim Corporation Tax Relief on the premiums.
The death benefit is paid out to the employee’s nominated beneficiaries and is generally free from inheritance tax.
You can save thousands of pounds every year.
Protection for your loved ones?
When set up correctly, Relevant Life Insurance can support you and your loved ones in a number of ways.
Overwhelmingly, clients come to us at Broadbench looking to secure life insurance that simply covers the outstanding amount left on their mortgage. However, it’s vital to consider any other debts in addition to your mortgage when establishing the amount of cover to secure.
The payout can be used to settle any outstanding debts. Many believe that their debts cease to exist when they do, but the reality is very different. Assuming their assets don’t exceed them, any debt is handed over to their next of kin. That’s why, in order to truly protect what you love, it’s important to consider debts beyond your mortgage.
Keeping your family protected after your death is about more than leaving them debt free. It’s also important to consider the loss of income they will suffer when you’re no longer around. What changes would that mean to your family’s lifestyle?
The cost of supporting a family and bringing up children is also something many people overlook when considering life insurance. Research conducted in 2021 by the Child Poverty Action Group found that the basic cost of raising a child to age 18, excluding housing, childcare and council tax, is £160,692 for a couple. £193,801 for a single parent or guardian. And that research only accounts for the basic cost of raising a child. What about the lifestyle your family is accustomed to?
Getting this right will give you the peace of mind that your family will be covered when you’re no longer around to provide an income.
A note from Positive Mortgages
If you are a contractor or limited company director we recommend our trusted partner, Broadbench Ltd. They are tax-efficient business continuity and succession planning experts. Their advisers have the skills and knowledge to offer you bespoke and impartial advice, taking in a holistic understanding of your circumstances and combining it with a deep knowledge of what different providers offer.
Excellent customer service is at the heart of everything they do, as their 5-star rating of Trustpilot proves.
Speak to one of our experts a call on 01202 850 830 for a no-obligation chat or click here to fill in our contact form and we will be in touch.