It’s an age old conundrum for contractors. Just how do you provide valuable life cover and financial security for your family in a tax efficient manner?
A revolutionary product has brought life cover into the 21st Century for small business owners. It’s called a Relevant Life Plan and could be the answer you’ve been looking for if you work through your own limited company.
A Relevant Life Plan (RLP) is a ‘death in service’ life policy for the individual. In its most basic form, it’s a term assurance plan designed to pay a lump sum benefit.
The plan pays out if the person covered dies during their employment. Or, if doctors diagnose terminal illness during that term, the plan also pays the benefit.
Relevant Life is similar to other types of life insurance in that respect. But it differs in that it’s a tax efficient alternative to providing valuable death in service benefits.
The unique way in which Relevant Life Plans work mean you can, in effect, have the taxman help pay for the cover. See, you knew they served some purpose.
While the cover is personal to you, the policy counts as an allowable business expense, making it tax deductible. The added bonus is that it doesn’t count towards annual or lifetime pension allowances.
In most cases Relevant Life premiums and benefits qualify for relief. This includes full Income Tax, National Insurance and Corporation Tax relief.
*% compares premiums paid through the business after relief to premiums paid from net pay, after tax.
The one thing about owning a business is that our circumstances rarely stay the same for long. A Relevant Life Plan is flexible enough to change with us.
You can increase the amount of life cover without the need for further underwriting because:
Many standard life policies cover only that: death. The irony. But even though RLP is, at its heart, a life cover policy, one particular insurer (Bright Grey) also offer a nurse adviser.
If the individual covered or a member of their family develops a critical illness, the plan will assign a nurse upon diagnosis.
This aspect of the service is available at any time, without the need to make a claim. Also, Relevant Life Plan:
With regards to the amount covered/premiums, they can be flexible, too. You can take out the policy as either a level, decreasing or increasing term basis.
The plan only provides life cover. It includes neither income protection nor critical illness cover.
The legislation surrounding this policy also imposes certain limits. It ensures that the premiums and benefits remain eligible for their respective tax allowances.
Here’s a summary of other main points about Relevant Life cover that small business owners need to know:
For more definitive information about our protection, feel free to continue to our Contractor Life Cover resource.
John Yerou is a pioneer of contractor mortgages and owner and founder of Freelancer Financials, Contractor Mortgages®, C&F Mortgages and Self Employed Mortgages, trading styles and brands of the award-winning Mortgage Quest Ltd.