The Relevant Life Cover is highly beneficial for an employee. Any employee of a company including and especially the directors can be a part of it. Apart from a company, an employee of a partnership, a charity, a sole trader can opt for this policy. Before you opt for Relevant Life Policy, one has to know all the details about the cover and various relevant life taxation rules. The following a detailed guide all the rules and norms of the policy.
Qualification Rules –
A person must be under the age of 75 years to be eligible for relevant life cover. As a matter of fact, the policy pays the sum assured and other benefits to a person who is before the age of 75. The traditional policy pays the lump sum amount only on death and not during a serious illness. But there are certain modern relevant life policies available that cover serious illness as well. There is no surrender value in the policy. If a company stops paying the premium of the policy, the policy is suspended. Furthermore, the amount payable in the policy on death will be paid only to the individual family member or a charity. Multiple persons or family members cannot claim it. Apart from the usual benefits, there are various tax benefits the policy offers and one needs to know the relevant life taxation rules before opting for it.
Taxation Rules –
As long as the premium of the policy is paid exclusively for the business purposes, the employer can enjoy corporation tax benefits on the payments. There is no need for payment of national insurance contributions from the employer or the employee’s side. There will be no inheritance tax on the pay to the family member in case of a mishap. The payments and benefits do not fall under annual or lifetime pension allowance. As it is a benefit in kind, there is no tax levied on the policy payment. The payment of the premiums falls under tax-free business expense. The amount can be free of income tax, capital gains tax, corporation tax, and even National Insurance tax.
The policy can cover in multiple times of the remuneration of the employee. The remuneration of the employee includes his salary, dividends, and bonuses. It also takes into consideration the age of the employee. The company needs to create a trust for the employee’s benefits as it is a legal requirement for a policy.