Life Insurance For Business Owners

It may not be the nicest thing to think about but life insurance is incredibly important, especially if you own a business. Life insurance for business owners, also known as relevant life insurance, means you can protect your beneficiaries if you pass away, which is particularly important if you have a family and are the main household earner.

Relevant life insurance caters specifically for contractors, business owners and key employees and provides financial reassurance for your beneficiaries if you were to suffer a terminal illness or pass away. What makes it so different from regular life insurance? The main attraction of relevant life insurance is the tax efficiency , and your family will typically receive a tax free lump sum to help them cope in the absence of the main household earner (in some cases).

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Life Insurance For Business Owners

What’s The Difference Between Standard Life Insurance and Relevant Life Insurance

Typically, you pay life insurance out of your own pocket and the monthly payments you’ll be making from your salary will be subject to tax and national insurance. In addition, your employer will have to pay a national insurance contribution. Whereas, with relevant life insurance, the Director or employee will pay no tax or national insurance and the employer won’t have to pay national insurance, creating a large saving for both you and your limited company.

Unlike other business benefits, such as a company car, relevant life insurance is not classed as a benefit-in-kind. So, all the benefits of relevant life come at no price to you.

In the event of death or earlier terminal illness the funds that are paid to your family will typically be made free of inheritance tax. A standard life insurance payout could be subject to inheritance tax, so it’s not guaranteed how much your family will receive.

What’s the difference between standard life insurance and relevant life insurance?

Typically, you pay life insurance out of your own pocket and the monthly payments you’ll be making from your salary will be subject to tax and national insurance. In addition, your employer will have to pay a national insurance contribution. Whereas, with relevant life insurance, the employee will pay no tax or national insurance and the employer won’t have to pay national insurance, creating a large saving for both you and your limited company.

Unlike other business benefits, such as a company car, relevant life insurance is not classed as a benefit-in-kind and it does not count towards your pension allowances. So all the benefits of relevant life come at no price to you.

If it does come to it, the funds that are given to your family if you die are also potentially free of inheritance tax. A standard life insurance payout is subject to inheritance tax, so it’s not guaranteed how much your family will receive.

Is There A Catch?

  • There are no catches with relevant life insurance, but it’s important to remember that a relevant life policy shouldn’t be take out solely for the tax benefits.
  • It should also be noted that the benefit can cover you up to the age of 75. You are only covered by relevant life if you die within the term of the policy.
  • All relevant life plans will need to be written into trust and your beneficiaries named therein to ensure the correct tax treatment is given to the proceeds in the event of a claim.

There is little risk involved with relevant life insurance, just remember that if the premium is not paid, then all cover will be stopped and you will no longer be protected.

Simply put, the tax-free aspect of a relevant life insurance plan is a no-brainer for business owners.

Relevant Life Policy Premium Benefits For an Employer:

No national insurance payments
Corporation tax relief

Relevant Life Policy Premium Benefits For An Employee

No national insurance payments
No income tax payments

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Life Insurance For Business Owners
Life Insurance For Business Owners
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Life Insurance For Business Owners
Life Insurance For Business Owners
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