Relevant Life Insurance is a tax-efficient means of providing your employees with a death benefit payout, without setting up a group policy.
It’s popular with both large and small businesses because premiums aren’t subject to national insurance contributions or income tax.
And it’s popular with employees, particularly high earning employees with large pension funds who don’t want these other benefits to form part of their pension lifetime allowance.
Any payouts from a Relevant Life Insurance policy are also not subject to things like income tax, corporation tax or national insurance.
As a life insurance policy offered by an employee, they’re one of the most tax-efficient ways of offering peace of minds to their families that you can offer.
But how much will it cost you to set up Relevant Life Insurance cover for your employees?
Let’s take a look
Calculating the cost of Relevant Life Insurance
Like any life insurance policy, the cost of premiums will be down to a few keys factors relating to your employees.
The usual indicators like age, lifestyle factors and any existing health conditions at the start of the policy will be taken into consideration.
But for your and your employee, there are a few other factors you might want to consider.
These are factors like personal expenditure of the employee, costs including mortgage payments, their length of service, and their annual salary.
Annual salary typically becomes a factor with Relevant Life Insurance because it is used as a multiplier to calculate the costs for the cover you’ll need to take out.
What can impact costs during the lifetime of the policy?
It is possible, during the lifetime of the policy, that you as an employer can increase the cover offered within the premiums to account for certain changes in your employee’s personal circumstances.
These could be changes like your employee increasing their mortgage obligations as a result of moving house, getting married or having children, or earning an increase in salary during their employment.
Any changes in personal circumstances should be reported to your provider as soon as possible, as failing to disclose them could impact any payouts you might claim at a later date.
How much is the payout from Relevant Life Insurance calculated?
How the premiums from Relevant Life Insurance are calculated in the case of a claim is usually based on one of two formulas.
First, in line with a pre-agreed fixed amount which was determined at the start of the policy. The benefit of this type of policy is that the cost of the premiums remain the same, unless your employee has a change in their personal circumstance.
Or, the premiums and payout are linked to the annual rate of inflation. In this option the cost of the premiums would also increase by the rate of inflation.
However, it also ensures that any payouts or claims keep up with the rate of inflation and meets the cost of living at the time a payment is made, rather than meeting the cost of living at the time the policy was first taken out.
Which level of cover you choose should be decided between you and your employees based on their individual circumstances, and the costs you can afford.
Need more information about a Relevant Life Insurance policy?
At Rigby Financial we’ve worked with hundreds of businesses to help them get the best cover for them and their employees.
If you want to know more about the benefits of Relevant Life Insurance for an employee, or are interested in what level of cover you could take out, get in touch with us.
Our team will be able to give you a full overview of the types of cover you’re eligible for, and guide you towards the best deal available.
Get in touch with us today.