Relevant life insurance for SMEs

Here, Jody Pearmain of discusses the concept of relevant life insurance and its pertinence to SMEs.

While large companies can take advantage of group life schemes and death in service, directors and high earning individuals are now able to take advantage of a new type of life insurance called relevant life insurance.

Relevant life insurance is much like a normal life insurance policy, apart from you can place the ownership under the limited company name. This means the company can pay the premiums and offset the costs as a taxable expense.

Each policy is set up with a discretionary trust which means any benefit from a claim will be paid via the trust to the life assured’s family as a tax free lump sum. Of course the advantage of taking a relevant life insurance over a normal life insurance policy is the saving of corporation tax (20 per cent) and then the fact that you are not having to pay out of your already taxed income.

So depending on your tax bracket, savings of up to 49 per cent could be made for people on the higher tax bracket. Below gives a working example of what you could save or use this calculator to view your own possible savings.


Information of the above is based on tax law of March 2015.

As with a normal term life insurance a relevant life plan pays out on death or terminal illness of the life assured while the person is employed by the company. If a person decides to leave the company they can sometimes transfer the policy to their new company or convert it to a personal life insurance. This will depend on the underwriter of the policy so it’s worth checking before you go ahead to see if that’s possible.

Costs of cover vary the same as normal term insurance, so age, sum assured, term and smoker status will determine the costs. Each employee can take out up to 25x their salary as a sum assured. For a company director this is based on salary plus dividends and bonuses.

So for directors who already have life insurance it’s well worth looking at changing it to a relevant life policy. Even if the premium is slightly more it can often still save you money. When getting quotes people should always try to use an independent broker, preferably one who specialises in business protection, who has access to a wide range of insurance companies. This will ensure that you get the most appropriate cover at the right price. Some brokers will also offer to discount the quotes by giving back commission to reduce the premium. It’s always worth asking!

Information regards to taxation levels and basis of reliefs are dependent on current legislation. Individual circumstances are not guaranteed and may be subject to change.

Jody Pearmain is director of

Praseeda Nair

Kellen Rempel

Praseeda was Editor for from 2016 to 2018.

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Business insurance