Are you a company director? If so, there’s a high likelihood that your life insurance payments are excessively high. The ideal solution to cut down how much you’re spending would be to take out a Directors Life insurance. This insurance cover is also called the Relevant Life Cover or Relevant Life Insurance and differs slightly from the personal cover. The difference usually arises because you pay for your policy via the company instead of directly from your pocket. Businesses that are still establishing themselves in the industry often opt for this cover as it’s more affordable than a group life scheme for the entire company staff.
If you’re still undecided on whether to take out the Directors Life insurance, look no further. In this guide, we’ll take you through the main reasons you should consider taking out a Relevant Life Cover.
1. Avoid Inheritance Tax
Among the biggest reasons to consider the Directors Life insurance is that your beneficiaries won’t be required to pay inheritance tax. This is usually the case because this cover isn’t viewed as part of your estate after your passing. If the size of your estates is considerable, you must consider this as your beneficiaries never have to worry about tax implications after your death.
With that said, you should make sure it’s taken out against a reliable trust when taking out a Relevant Life Cover. This way, your beneficiaries get the added benefit of accessing the estate without paying any inheritance tax.
2. Doesn’t Affect Your Pension Lifetime Allowance
You most likely are highly paid to be a director of the company. The Directors Life insurance cover can prove valuable in such a case as it provides you with alternative life insurance to the regular death-in-service benefits. Any payment made under the group life scheme is categorized under the annual pension lifetime allowance. This means you end up paying significant taxes when you request your pension.
Taking out a Relevant Life Cover offers you an option that isn’t tax-deductible. If you’re a higher earner, this means you enjoy greater peace of mind as your beneficiaries will get a tax-free payment. This is the case because payouts to the Relevant Life Cover aren’t directed to the pension allowance.
3. Benefits the Business
Directors Life insurance is tax-efficient compared to group life insurance. This difference is that the Relevant Life Cover enables you as the director or company owner to cover yourself with the business instead of your personal income. In addition, this does offer you the benefits enjoyed by employees. In contrast, group life insurance, while being cheaper than bigger companies and any business with one or no employee, doesn’t qualify.
Relevant Life over is also advantageous because it helps attract and retain your employees by showing their efforts are well appreciated. This makes the company build a sense of a family bond, which is vital for its success; moreover, it lowers the company’s corporate tax bill as Directors Life insurance is viewed as an expense.
