Relevant Life Policy: How Is It Suitable For You?

Relevant Life Policy
Relevant Life Policy

The relevant life cover has been designed to provide protection to the employees who are working in small organizations. It is funded by employers who wish to set up a death-in-service benefit for their employees beyond the coverage offered by the chief company plan. This plan is typically suited for organizations having too few workers to qualify for group life schemes. As the employer is funding the relevant life policy, only he should complete the application form. If you are thinking about securing this cover but are not sure as to how suitable it would be for you, then you can go through the features, benefits and restrictions of this policy thoroughly to make a decision. As we progress through this article, we will know more about them.

Requirements to be fulfilled if you want to secure this policy

This relevant life policy is fairly new in the market. Therefore, it would only be wise for you to go through the legislative requirements that need to be fulfilled if you want to opt for it:

  • The policy can be secured by limited companies having directors.

  • It does not have a surrender value.

  • The kind of insurance can’t be sought for covering business loans, or for business succession or planning.

  • The benefits are payable before the client turns 75 years old. The cover stops providing protection as soon as the insured celebrates his 75th birthday. There are certain insurance carriers that allow a cover to be set up for a fixed tenure until the client turns 50 years old, or else be renewed for every five years. But whatever be the case, the cover can’t extend beyond 75 years, as already mentioned.

  • The amount is payable through a discretionary trust.

  • Income protection, disability, and critical illness can’t be covered by relevant life insurance. A terminal illness cover, though, can be added. But the benefits of this cover will only be paid when the employee is still working for the employer who had originally set up this cover for him.

  • Both the employer and the employee are entitled to substantial tax relief. But the purpose of securing the cover should not solely be tax avoidance.

How Suitable Is It for You?

Provided you fulfill the legislative requirements of the relevant life cover, then it would be sensible to invest in one since it will offer you significant tax benefits that a traditional life insurance policy won’t do. Let us find out more about them.

The employer is entitled to significant tax rebates as the premiums paid are considered to be part of trading expenses. It is particularly suitable for the high-earning employees with substantial pension funds as they can keep the benefits of this policy separate from the pension funds and other allowances that they receive. The amount provided can even be worth 20 times the annual salary received by you.

What is the role of the trust in the payment of the benefits?

As soon as the employer completes the documentation process (i.e., the application process), the relevant life policy trust is set up. Please remember most of the insurance providers would require the trust to be set up before the policy is issued. The employer is one of the trustees. A separate trust deed has to be drafted in case the need for additional trustees arises. You can leave behind a letter of wishes, indicating how you want the money to be spent, or else when you want your children to be in charge of the money. Though this letter does not have a legal significance but the trustees will definitely take the points into consideration while paying the benefits.

Author Bio: ST is a regular blogger, writing mainly about insurance and loans. His writings primarily reflect the changing trends in the finance sector.

 

Relevant Life Policy: How Is It Suitable For You?