RELEVANT LIFE INSURANCE +
Tax efficient Relevant life Insurance with the option of including employee significant illness cover for 28 serious illnesses
"A unique Relevant Life Insurance policy specifically for businesses who want a tax efficient way to offer both life insurance and additional significant illness cover to their employees and directors on an individual basis."
Relevant Life Plans are an extremely tax efficient life insurance policy that a business can provide as a death in service benefit for individual employees, including directors. Monthly premiums receive corporate tax relief of up to 25% and attract no employer national insurance cost. No P11D benefit in kind is incurred, saving employers, employees and directors both national insurance and income tax costs.
This product is different than other Relevant Life Plans in that it also enjoys the full tax efficiencies on the unique significant illness cover it can include. The cover is similar to but not the same as critical illness cover, which generally has more conditions covered including many that are not classed as critical.
Monthly premiums receive corporate tax relief of up to 25% and attract no employer National Insurance cost. No P11D benefit in kind is incurred, saving employees income tax at their highest rate. Company directors can make significant savings, typically up to 50%, by allowing their company to pay for their protection needs through this type of product.
Depending on an individuals rate of tax and a company's rate of corporation tax, even whilst maximising tax efficiencies via dividend payments, some individuals will enjoy savings of up to 66% compared to paying for similar benefits from post tax income.
RELEVANT LIFE PLANS USUALLY ONLY INCLUDE DEATH BENEFIT
This unique product, provided by Aviva allows businesses to provide a Relevant Life Plan that gives employees and directors the option of including (in addition to life insurance) Aviva's employee significant illness benefit which covers 28 serious health conditions.
What conditions are covered?
28 conditions are covered which would result in payment of the benefit amount selected*
These include the following:
Advanced cancer, Aplastic anaemia, Bacterial meningitis. Benign brain tumour, Benign spinal cord tumour. Brain injury due to anoxia/hypoxia, CJD,
Devic’s disease, Encephalitis, Intensive care (ten days), Kidney failure, Liver failure, Major organ transplant, Motor neurone disease. Multiple Sclerosis,
Neuromyelitis optica, Parkinsons Disease, Parkinson’s plus syndromes, Pneumonectomy, Psychosis and bipolar affective disorder, Pulmonary arteria hypertension, Respiratory failure, Severe heart condition, Spinal stroke, Stroke, Systemic lupus erythematosus, Third-degree burns (20% coverage)
Traumatic brain injury
Total and permanent disability
*It's important to note the insured must meet the providers definition of one of the above defined employee significant illness conditions during the policy term, survive at least 10 days and the condition results in the retirement or anticipated retirement of the insured.
Tom is a company director (business owner) and is considering life insurance through the business as opposed to buying it personally. In addition he wants to protect against the most serious illnesses which would likely force him to retire. His concern is that if became seriously ill, forcing him to retire, he could lose the valuable life insurance benefit, just when he needs it the most.
The cost of the premiums for each of these plans are identical, as we would expect from most providers. So which does Tom select? They both look like the similar benefits for the same premium.
Relevant Life Plans are not cheaper than personal life plans. In fact, they're usually the same cost. The savings are made simply by having the right type of policy in place which qualifies for the beneficial tax treatment.
The following tables demonstrate the difference in tax treatment between a personal life insurance policy and a qualifying relevant life policy. Both policies illustrated are for slightly different benefit levels but the term and premiums are the same. Tom can choose to pay for his own policy from post tax income, or he can elect that his business provides the valuable cover he requires.
Personal or Business Life Policy including Critical Illness Cover
ANNUAL PREMIUM (£100 per month)
Gross earnings Required
to pay premium
Employee National Insurance Paid (2%)
Employee Income Tax Paid (40%)
£1200.00
£2068.97
£41.38
£827.59
Employee net pay £1200 = £100 pm
Employer National Insurance Paid (13.2%)
Corporation Tax Relief Granted (20%)
£285.52
-£470.90
Net Cost to Tom
£1883.59
Relevant Life Policy including
Significant Illness Cover
ANNUAL PREMIUM (£100 per month)
Gross earnings Required
to pay premium
Employee National Insurance Paid
Employee Income Tax Paid
£1200.00
N/A
N/A
N/A
Employer National Insurance Paid
Corporation Tax Relief Granted (20%)
Net Cost to Tom
N/A
-£240.00
£960.00
If Tom selects this option he is £923.59 per year better off compared to the personal plan shown, equivalent to a saving of 49%
Tax Efficient
In this example Tom is a higher rate tax payer. If Tom was a basic rate taxpayer the savings could still be as much as 40%. Based on current tax legislation 2023/24 tax year.
There can be significant differences in cost depending on how one arranges life insurance. If you'd like to see how much you can save, get in touch below.
The inclusion of employee significant illness benefit was extensively researched by Aviva's internal and external legal counsel. Aviva and HMRC are in agreement that Aviva's Relevant Life Insurance with employee significant illness benefit qualifies as a Relevant Life Insurance product.
This means the product offers all the tax efficiencies that all Relevant Life Plans provide, typically saving up to 50% (in some cases as much as 66%) compared to the cost of buying the same cover personally.
The last thing anyone wants when facing a serious illness is the additional burden of worrying about financial matters. With employee significant illness cover, employees and directors could receive the financial support they need on diagnosis of a specified illness causing early retirement or anticipated retirement
LIFE COVER INCLUDING EMPLOYEE SIGNIFICANT ILLNESS COVER
Pays out a lump sum if the life covered either dies during the policy term or meets the definition for one of Aviva's defined employee significant illness conditions during the policy term, survives for at least ten days and the condition results in the retirement, the anticipated retirement or return to work on a reduced capacity of the life covered.