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Relevant Life Insurance – Awareness

Relevant Life Cover is a life insurance policy offered by the company your work for. It allows companies to offer a death-in-service benefit to its employees (including salaried directors). It’s set up by the company and pays out a tax-free, lump sum on the death (or diagnosis of a terminal illness) of the person insured.

It can help smaller businesses attract and retain high-calibre staff by offering them attractive benefits packages that are also tax efficient. It can also be a tax-efficient way for shareholder directors to take out life insurance.

Tax benefits

There can be tax benefits for both the employer and employee.

Employer benefits:

  • corporation tax relief (so long as the premiums are wholly and exclusively for the purposes of the business); and
  • no National Insurance contributions to pay on the policy payments paid to fund the Relevant Life policy.

Employee benefits:

  • no National Insurance contributions to pay on the policy payments paid to fund the Relevant Life policy;
  • the policy payments won’t be taxed as a benefit in kind; and
  • policy payments and benefits don’t count towards annual or lifetime pension allowances.

With great benefits, this policy offers peace of mind for both the employer and employee so it’s surprising that awareness of Relevant Life Plans (RLPs) has reduced by 24% in the last two years, with only 28% of businesses being aware of such policies in 2015, according to Legal & General.

The insurer’s research, which surveyed nearly 850 business owners across various industries, showed that awareness was higher two years previous, with 37% of owners in 2013 knowing about RLPs. The research also found that those businesses least likely to have heard of RLPs were not for profits, small businesses and those in the property/real estate and education sectors.

Richard Kateley, head of specialist protection at Legal & General, said: “Relevant Life Plans are policies which many employees would like to be offered by their company, if only they knew about them. However our research shows that few know they exist and therefore are unaware of the benefits they could offer. Our research actually shows that there has been a reduction in this awareness among business owners over the last few years.

All businesses should consider relevant life insurance for their staff and Directors, it is a great way to attract and keep good staff and is a tax efficient way of offering benefits for such important insurance protection.

For further information on relevant life insurance, please contact Stuart James Financial Solutions on 01423 561060 or email info@sj-fs.co.uk

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Are you confused about protection insurance?

In a state

Consumers need help to better understand the benefits of taking out protection products according to State of the Protection Nation a new study released today from Royal London. The research finds that many barriers to buying protection products are due to perception and can be overcome with better education. The study of 2,000 people found that while a quarter of UK adults have a life insurance policy (26%), just 6% have critical illness cover and 4% have income protection insurance.

For each product, the same barrier is top, price – with nearly one in three who don’t have life insurance, critical illness cover or income protection saying they think the products are too expensive (29%, 32% and 31% respectively). Analysis of premiums Royal London customers pay reveals the average life insurance premium is £21.28 per month for over £120,000 of cover and the average critical illness cover premium is £30.58 per month for over £71,500 of cover.

The second most common barrier was people not seeing the benefit of the product. Yet almost two fifths (38%) say it is important to ensure that their family and dependents are looked after financially should they die and half (47%) agree that life insurance is essential for anyone with a mortgage or dependents. This shows that with better education, from the industry and advisers, more people could be better protected.

The third barrier is not trusting insurance companies to pay out in event of the claim. Yet the most recent industry figures show insurers pay out in 97.2% of all claims.

The research reveals that more people see a need for the products than actually have them, suggesting that with greater action on the barriers the UK could be better protected. While one in 10 (9%) say they see the need for income protection just 4% hold it and while 12% say they see the need for critical illness cover, just 6% hold it. For life insurance, however, take up matches perceived need, where 27% see the need and 26% hold it. Those with children under 18 are much more likely to believe that all three types of product are needed, in particular critical illness cover (21% compared to 9% who don’t have children).

Royal London also found more work needs to be done to help people understand what could happen to them during their working life. According to the research, respondents were more likely to think they will die (22%) within their working life than be made redundant (15%), contract a serious health condition or illness (15%), go on sick leave for three months or more (11%) or have an accident preventing work (9%). Yet a quarter (25%) of those polled had been made redundant or lost their job at some point, whilst one in seven (15%) have been off sick for three months or more or been diagnosed with a serious health condition or illness.

To find out more or to gain financial advice contact us on 01423 561060 or email info@sj-fs.co.uk