relevant life insurance for directors

Share This Guide, Choose Your Platform!

Introduction

Are you paying for your life insurance out of your own pocket as a UK contracting professional? Indeed, if the answer is yes, you may be paying too much. Therefore, as a contractor or limited company director, it is time to look for the best life insurance policy (UK). Relevant Life Insurance for contractors is tax-efficient life cover, however, what is relevant life cover? In summary, Relevant Life cover for directors moves the cost of your contractor life insurance policy from your pocket to your company expenses. In conclusion, if your business pays for a policy for relevant life insurance for directors, it will benefit from tax savings that lower the premiums.

To get a Relevant Life Insurance quote or find out more about RLI, simply click on the button below

Enquire About Relevant Life Insurance

Initial thoughts -limited company contractor life insurance

What to think about first

Let’s delve into what a relevant life policy entails for owners of their own UK contracting company. Beyond the tax advantages, Relevant Life Insurance for contractors provides a comprehensive safety net. It safeguards your mortgage, your family’s future standard of living, your income, and your health, ensuring you’re covered in all aspects of life.

Relevant Life insurance for directors is a highly tax-efficient method of providing life insurance for you as an employee/director of your own contractor limited company. When it comes to the tax implications, the director’s life insurance policy is covered by your business. These premiums are approved by the HMRC as a tax-deductible business expense, provided you adhere to certain conditions during policy setup. With Relevant Life Insurance, premiums are not considered a benefit in kind, and there are no National Insurance implications, offering you significant tax benefits.

Further initial considerations 

Please note that you can take out a Relevant Life plan policy to protect employees or directors. This will give the person covered family income benefits. When you extend cover to your staff, this can also include your spouse. Importantly, it is key that you’re aware that when you pay for an RLP plan, this is on the basis that you or your employees receive a salary from your company.

Other financial products for UK contractors

In addition to the best Relevant Life insurance for contractors, four other financial products are specifically for a limited company contractor. Therefore. Depending on your circumstances, these may be worth consideration:

Now, back to contractor life insurance in the UK. Whether you’re a business owner or a limited company contractor, a Relevant Life policy is very tax-efficient. Indeed, this is when you compare it to personal life insurance. After reading this guide, please complete the form below to find out more.

life insurance for directors

Key considerations when taking out a Relevant Life plan

What is Relevant Life cover for contractors? 

Whether you’re a business owner or a contractor, a Relevant Life Insurance policy offers incredibly tax-efficient company director life insurance.

As a contractor, you work for yourself and can miss out on benefits traditional employees take for granted. After all, there is no sick pay or death in service benefit. Therefore, if you own a limited company and already have life insurance, you should consider switching to Relevant Life cover for directors’ insurance policy. It is tax-efficient and could save you money.

So, what is Relevant Life Insurance, and why could it be right for you? Indeed, the headline benefit is tax efficiency. Indeed, you can immediately save tax by the business paying the contractor life insurance cover premium. However, it is not treated as a benefit-in-kind as the premium is not included as a P11D benefit. Therefore, the policy premiums are not subject to national insurance payments by the employer or employee. As a result, your business can claim Corporation Tax Relief on the premiums, and the benefit is payable tax-free.

How much can you save with a life insurance policy for contractors? 

When you take out an RLP plan, you can make significant savings compared to paying for life insurance personally. Therefore, let’s see later in this article how the cost of your contractor RLP policy shifts when you obtain a Relevant Life cover quote. It will move from your pocket to your company expenses and the taxman.

Further facts on Relevant Life Insurance for directors 

A Relevant Life Insurance (RLP) policy provides life cover to the policyholder’s dependants. The funds are paid via a discretionary trust.

When you look for a Relevant Life Insurance quote, the premiums are paid for by the contractor’s company rather than the employee. Therefore, as a legitimate business expense, the cost of the life insurance for company directors’ policy will save tax for you as the contractor. In addition, a Relevant Life Insurance policy is also a prevalent type of insurance for contractors in the UK.

What are the key facts about Relevant Life Insurance? 

Relevant Life Insurance is one of the most tax-efficient ways of providing life insurance for an employee/director of a limited company. Your business pays for the policy, and the premiums are HMRC-approved as a tax-deductible business expense. However, with a Relevant Life policy for directors, premiums are not a P11D benefit. Therefore, neither the employee nor the employer will incur any National Insurance implications. Should the policyholder die, the claim is paid tax-free.

A company director in the 40% or 45% tax bracket could make significant savings compared to personal life insurance because of the tax efficiency of the policy.

Considering that life insurance is for directors and contractors, the relevant life policies either increase or level life insurance. Therefore, level Relevant Life Insurance policies tend to have lower premiums, whereas with increasing Relevant Life Insurance, premiums are higher. Indeed. This is because inflation can reduce the level death benefit’s real value. However, with an increasing or indexed death benefit, it rises in value over years to offset inflation. To sum up, as with all financial matters, we recommend that you complete the form below ahead of speaking to a professional Financial Adviser when considering life insurance for directors.

Please remember that all directors must meet strict conditions when setting up a Relevant Life Insurance policy.

contractor life insurance

Other areas to consider 

What does director life insurance cover? 

Relevant Life Insurance will protect the following types of individuals:

  • Employers looking to provide death-in-service benefits, but with too few employees to set up a group scheme.
  • Directors wishing to provide their own individual death-in-service benefits without taking out a scheme on all employees.
  • High-earning individuals, such as directors, where death-in-service does not form part of their ‘lifetime allowance’.

The policy options for limited company contractors are level life insurance or increasing life insurance. Therefore, what is the difference between these policy options for limited company contractors? Relevant Life Insurance policies with level death benefits will carry lower premiums than those with an increasing death benefit. However, this does not necessarily mean that level death benefits offer superior value since inflation can reduce the level death benefit’s real value. Indeed, Relevant Life Insurance policies offer an increasing (indexation option) death benefit. Furthermore, it rises in value over future years. However, you should take professional, whole-of-market advice to assess which contractor life insurance cover best suits your needs.

Relevant life insurance is unavailable where there is no employer/employee relationship.

Relevant life insurance for contractors

An example of Relevant Life Insurance

Let’s assume that you own your own company. For example, you pay £100 a month and choose to pay for contractor life insurance out of your own pocket, i.e., personally. However, this will cost your business more than it should. However, if you are a 40% taxpayer, you must consider that you will have already paid tax on the £100 in the form of income tax and employer and employee NI contributions. In fact, after 19% Corporation Tax (CT) relief, the net cost to your business works out at £158.93 per month.

When you have a Relevant Life Insurance policy for your contractor life insurance, you do not pay any NI contributions or income tax on the premiums. However, you will still receive a 19% or 25% CT relief on the cost of your Relevant Life cover for directors’ policy. This means the net cost is only £81 or £75 per month. As a result, this is a considerable saving of £77.93 or £83.93 a month. Therefore, the overall savings when you take out Relevant Life Insurance for contractors equates to £935.16 or £1,005.16 over the year.

Significant savings

A good financial adviser can advise you of the substantial savings which you can make. Indeed, this comes when you attain the best Relevant Life Insurance for contractors’ quotes and pay for a policy through your own company. Please complete the form below to find out more.

A Relevant Life Insurance policy offers significant savings for you as a contractor and company director. It also offers unique advantages to small business owners who look for life insurance cover for directors. Furthermore, it gives financial protection to your family when you are no longer around.

What are the benefits of taking out RLP? 

While the life cover is personal to you, the Relevant Life policy cost counts as a genuine business expense. Therefore, when the business pays this, it is tax-deductible. Now, let’s learn more about how a Relevant Life Policy’s benefits can benefit you:

1 Save tax When you pay for life insurance through a limited company, you will immediately save tax. Indeed, this happens when the business pays the contractor life insurance cover premiums.
2 No BiK HMRC will not treat the payments as a benefit in kind. Therefore, you will not need to report the premium as a P11D benefit.
3 Not subject to NI The limited company director life insurance premiums are not subject to NI payments for the employer or employee.
4 Claim CT relief Your business can claim CT Tax Relief on the cost of the premiums.
5 Payable tax-free The benefit is payable tax-free.

Advice

Please note that Relevant Life Insurance for company directors’ policies should be considered when you’re a contractor looking for contractor life insurance. Indeed, there are different types of company director life insurance for contractors in the UK, and this policy offers an excellent level of coverage for your dependents. In addition, you can also make significant savings if you pay for this through your UK limited company.

Get a free quote

If you would like to request a Relevant Life Insurance for directors’ quote on tax-efficient life insurance, please contact our trusted partner, Broadbench. Indeed, when you get in touch, you can book an appointment with one of their expert Contractor protection advisers.

Download their Guide to Relevant Life Insurance for further information on Relevant Life Insurance for directors and contractors.

Please complete the form below if you would like to know more about RLI. The team will get right back to you with further details.

Find out more about relevant life insurance

Relevant Life Insurance
Smoker Status

Frequently Asked Questions

When considering life insurance for directors, what is available? Today, directors and business owners can run their life insurance policy through their limited company. As part of this, you can provide important protection for your business or your family for the future, should the worse happen. The policy is called Relevant Life Insurance.

As a director of your own company, you can take out director life insurance in the form of a Relevant Life Insurance policy. This works in a similar way to the `Keyman’ type life insurances for bigger firms and is available to limited company directors and is very tax-efficient.
As a director of your own company, if you take out a Relevant Life Insurance policy, this is a genuine business expense. While the life cover is personal to you, the policy counts as a genuine business expense and is tax-deductible.
The key difference here is that life insurance is designed to cover the policyholder for a specific term. In contrast, life assurance usually covers the policyholder for their entire life.

Frequent searches: Relevant life insurance for contractors, Relevant life cover for directors, relevant life insurance for directors

Published On: April 6th, 2024 / Categories: Contractor Tips, Finances, Finances post, Financials, Most Read Articles, Tax Saving Guides /

Share This Guide, Choose Your Platform!

3 Comments

  1. jeep liberty 2009 April 16, 2024 at 1:52 pm - Reply

    Of course, what a great blog and instructive posts, I surely will bookmark your blog.Have an awsome day!

  2. c5967475961009432769 May 21, 2024 at 4:40 am - Reply

    Hello! I’ve been reading your site for a while now and finally got the courage to go ahead and give you a shout out from Kingwood Texas!

    Just wanted to mention keep up the good job!

    • contractoradviceuk May 21, 2024 at 5:32 pm - Reply

      Ok, thank you for the compliment.

Leave A Comment