Many of us have an understanding of personal life insurance policies. These policies pay out a lump sum to our loved ones in the event of our death to help with expenses like funerals and loss of income.
Relevant life insurance is similar to this, with the key difference being a saving you can make on your tax bill.
Relevant life insurance is taken out by a company for a director or specific employee. Because it is paid before deductions for National Insurance and tax, this means that you can make serious savings on your tax bill.
Here are some of the key reasons that directors are turning to relevant life insurance.
Providing For Loved Ones
As is the goal for any life insurance policy, relevant life insurance can ensure that your loved ones aren’t left struggling financially in the event of your death. This can be particularly important for anyone leaving behind a young family or with a mortgage still to be paid off. While nothing can substitute your presence in your loved ones’ lives, the money that a relevant life insurance policy can bring can help ease the potential financial burden on those left behind.
Some people decide to take out relevant life insurance after getting married, buying a home or conceiving a child. When and why you take out a relevant life insurance policy will primarily come down to personal circumstances, but it is a wise choice for anyone keen to ensure their loved ones’ financial security.
Reducing Excessive Inheritance Taxes
A relevant life insurance policy is written into trust, meaning that it cannot be subject to inheritance tax. Inheritance tax is often costly for those hoping to leave money to their loved ones, with bills running into the thousands and more for larger estates.
However, you must not tax out relevant life insurance solely to avoid tax. Relevant life insurance is a crucial way to provide for your loved ones, so you should check with HMRC requirements to ensure that you make the right choices for yourself and your family.
Saving On Employment Contributions
There are excellent tax benefits for taking out relevant life insurance. A personal life insurance policy will usually be paid from your take-home pay, meaning you will have paid tax and National Insurance contributions before buying your policy.
A relevant life insurance policy will be taken from your wages before tax and National Insurance. This means that you can make huge savings on tax – up to 49% for high earners. Take a look at this article from Drewberry for more information: what are the benefits of relevant life insurance?
Attract Talented Candidates
For small businesses with limited resources offering relevant life insurance to employees can be an excellent way to stand out among your business rivals. Competition to recruit the top talent can be fierce, and businesses need to do all they can to ensure that they make their company an attractive prospect for potential employees.
Showing Employees You Value Them
Micro businesses who provide a relevant life insurance policy to an employee as a benefit can be an excellent way to show them that you value them and their place in your business. Feeling valued is crucial to ensure employee satisfaction, and providing excellent benefits is one way to promote employee wellbeing. It can also show that you care about your employees beyond simply the value they can provide to your business – you care about their and their family’s long-term wellbeing.
Money worries and worries about the future are contributors to stress and anxiety in workers. Offering an attractive, relevant life insurance option to employees can help alleviate these stresses, meaning that employees will be more productive and committed in their role.
Consult An Expert
It is always a good idea to get professional advice when considering whether to take on relevant life insurance for yourself or your company. Discuss your options and ideas with a reputable provider like Drewberry, who will be able to give you expert advice and help you navigate the process of setting up a policy or policies. There are some instances where your company may be ineligible for relevant life insurance, so discussing this with an expert advisor can be invaluable to ensure you stay on the right side of HMRC.
Final Thoughts
Relevant life insurance can be an excellent benefit for directors and employees alike. It is essential to look to the future, and the future of your loved ones, to ensure that you make smart decisions for future financial planning. There are many reasons you may wish to take out life insurance for your family, and it is worth discussing your plans with your loved ones.
Relevant life insurance can also be the most cost-effective solution, particularly for high earners. The tax benefits are an excellent bonus for anyone hoping to make smart plans for the future.
