Spectrum Financial Advice Guide to Relevant Life Plans/Death in Service Insurance

What is a relevant life plan or death in service insurance? Learn everything you need to know right here in our comprehensive guide to relevant life plans.

Contents

  1. Spectrum FA Guide to Relevant Life Plans/Death in Service Insurance
  2. What is a Relevant Life Plan?
  3. What Does ‘Death in Service’ Mean?
  4. What are the Likely Tax Benefits?
  5. How Does Death in Service Insurance Work?
  6. Who Receives a Relevant Life Policy’s Benefit (Pay-Out)?
  7. If Significant Illness Cover is Added, What Illnesses Will Be Covered?
  8. How Much Do Relevant Life Plans Cost?
  9. Who Should Consider Death in Service Cover & Why?
  10. How Can Spectrum FA Help You with Relevant Life Cover?

Spectrum FA Guide to Relevant Life Plans/Death in Service Insurance

Specialising in all aspects and types of business protection insurance, Spectrum FA have assisted many companies and organisations across the UK set up suitable relevant life cover for single or multiple individuals in their employment. But what exactly is a relevant life plan (or death in service insurance), how does it work, who benefits from it and who pays for it? This comprehensive guide to relevant life plans aims to answer all these questions and more.

Interested in learning more about other ways to protect your business? Contact us today – our advisors will be happy to provide you with information on all available options.

What is a Relevant Life Plan?

Frequently also referred to as relevant life or death in service cover or insurance, relevant life policies are taken out by employers on behalf of one or more people within the company.

Typically offered as part of wider employee benefit schemes, relevant life plans consist of life insurance policies to which significant illness cover and/or other optional add-ons/extras may be added.

A relevant life plan offers a tax effective way for an employer to arrange life cover (death in service) and also significant illness cover (if selected) on the life of an employee, which may include directors.

The premiums are paid by the business, usually as a business expense, however, the benefits are payable to the employee’s family or financial dependants in the event of death. In the event of a significant illness, the employee can choose to retain this benefit, or pay it to their chosen beneficiary(ies). Learn more.

What Does ‘Death in Service’ Mean?

“Death in Service” is a rather unfortunate choice of term, as it is often mistakenly interpreted to mean that for a policy to pay out, the insured individual must pass away while working on the business premises or being engaged in work-related activities elsewhere (i.e. while attending conferences, training sessions or trade shows, for instance).

This is, however, not the case. Policies will pay out upon a named individual’s death or, if significant illness cover was added, diagnosis of a specified significant illness for as long as they remain within the company’s employment – regardless of what they happen to be doing (or indeed wherever they happen to be) at the time.

In other words, a relevant life policy would, for instance, pay out if the insured employee unexpectedly passed away while on holiday or be struck with a debilitating stroke or heart attack (if significant illness cover is selected) while asleep in their own bed.

Cover effectively ceases only if a named employee leaves the company – although it is possible to make this type of cover transferrable (i.e. employees may carry it over to other employers). To learn more about this option, please contact our team of advisors today.

What are the Likely Tax Benefits?

Relevant life plans are very similar to most other types of life insurance policies, except they offer a tax efficient way for a business/employer to arrange life insurance and significant illness cover (if selected) for an employee, including directors. As such, relevant life plans and the premiums are viewed as an allowable business expense by HMRC. Therefore, all premiums paid by the employer will qualify for corporation tax relief. The benefits are paid out tax free to the employee or their chosen beneficiary(ies) and the premiums paid by the employer are not treated as employee income or classed as a P11D benefit in kind.

For further detailed information on the above, please contact us.

How Does Death in Service Insurance Work?

Taken out by you (your company) on behalf of your most valued employees (i.e. directors, managers, other employees of significant importance to your business), death in service/relevant life policies pay out a pre-determined lump sum upon the death or significant illness (if selected) diagnosis of a named individual.

Allowing you to provide your employees with cost-effective, tax-efficient life/significant illness cover (if added), these policies remain entirely under your control – which means as the policyholder, you will determine:

The amount of cover and whether this cover remains level (i.e. stays the same throughout the policy’s duration) or increases over time to counteract the effects of future inflation.

Which add-ons/optional extras to include (i.e. significant illness cover, total permanent disability, TPD).

Not sure which employees to insure, how much cover to provide or which optional add-ons to select? Spectrum FA can help you make these important decisions – request a no-obligation review now.

If Significant Illness Cover is Added, What Illnesses Will Be Covered?

There are a number of significant illnesses that are covered under the terms and conditions, including, for example:

  • Stroke, kidney failure & major heart attacks
  • Various specific cancers (these cancers will be defined within any given policy’s terms & conditions)
  • Major organ transplants
  • Benign brain tumour
  • Brain injury due to anoxia or hypoxia
  • Creutzfeldt-Jakob disease
  • Dementia
  • Encephalitis
  • Liver failure
  • Multiple sclerosis
  • Motor neurone disease
  • Parkinson’s disease
  • Pulmonary arterial hypertension
  • Respiratory failure
  • Third degree burns

Do you wish to add significant illness cover to your employees’ relevant life plans? For expert advice/guidance concerning this question and for more detailed information on the conditions/illnesses that may be covered, please contact our team of specialists today.

Who Receives a Relevant Life Policy’s Benefit (Pay-Out)?

Relevant life insurance is designed to protect insured employees’ families in the event of an unexpected death or significant illness (if added) and as such, insured employees will have the opportunity to name their chosen beneficiaries.

Policies must, however, be issued under trust (from the start of the plan) and the named trustees on the plan will assist with any claim and also arrange the payment to the named beneficiary(ies). In the event of the insured individual passing away, payment can be made to the named beneficiary(ies) and in the event of a significant illness, payment can be made to the beneficiary(ies) or the employee can decide to retain the significant illness benefit. Beneficiaries can be amended or changed at a later date.

Spectrum FA are able to recommend the most suitable plan and will also arrange for the policy to be placed in the correct trust. Learn more.

How Much Do Relevant Life Plans Cost?

Premiums for relevant life cover depend on;

  • The amount of cover you intend to provide (and whether this cover will remain level or increase over time);
  • Which (if any) add-ons/optional extras you choose to include and
  • Each named employee’s age, medical history and whether they smoke or not (please see our “Guide to Key Person Insurance UK” for more details on this).

Premiums also vary between policies/providers, so it is important that you receive expert advice to ensure you obtain the most suitable policy for your specific needs. To learn more, please contact our experts today.

Who Should Consider Relevant Life Insurance & Why?

Worrying about how their families would cope in the event of their death or a significant illness may significantly affect employees’ morale, attitude & focus on their work and consequently their productivity – which in turn can affect a company’s profitability.

Providing employees, including directors with peace of mind in the knowledge that their families will be provided for if anything unforeseen should happen to them, relevant life plans can:

  • Improve employees’ morale & attitude
  • Increase their ability to focus on the tasks at hand and thereby their productivity & your business’ profitability

Offering these plans as part of your employee benefits scheme also enhances your reputation as a responsible employer who cares for both employees and their families and consequently can make it easier for you to both attract and retain high-value staff.

In a nutshell, any company with employees – be it just one or two or hundreds – should consider taking out relevant life plans/death in service cover for at least some of their most valuable members of staff.

Do you have employees? Request a no-obligation review (without charge) of your company and its employees’ unique needs today.

How Can Spectrum FA Help You with Relevant Life Cover?

Spectrum FA are experts in business protection insurance and have arranged tax efficient relevant life plans for many businesses. We will advise on a suitable amount of cover, policy term, policy add-ons and will place the recommended policy in the appropriate trust. We also have access to the leading insurance companies at competitive rates.

Once you have decided to proceed, we will guide you through the entire process and assist with completing the paperwork. This will then be submitted, by us, to the chosen insurer and we will liaise with that insurer on your behalf to ensure the plans complete underwriting as quickly as possible so the individual employees are covered.

Are you ready to give your staff peace of mind and arrange suitable relevant life plans? Contact us to arrange your no-obligation review today – we look forward to working with you.