Planning for the future – what insurance cover is relevant to you?

February 16, 2017 | Posted by Sonal Agarwal | Accounting, Business Advice, Taxation, Whitepapers,


When you are planning for the future for you and your family, taking out life cover will give you considerable peace of mind from unforeseen circumstances. This can easily be overlooked when you are self-employed, or own a small business, and are busy with other priorities.

Did you know that you could buy life insurance for you and your key employees to cover death in service?

This type of plan is called a relevant life cover and the premium is paid by the employer. The employee or nominated heirs gets a lump sum payment in the event of death or diagnosis with a terminal illness. There are savings for the employer as well, as they can offset the cost against corporation tax.

The big benefit for the employee is the insurance is not a benefit in kind, so they do not pay any tax or NIC. Furthermore, the claim will be treated as outside of the employees’ estate, and therefore, not relevant for inheritance tax.

The money can be used to

  • Pay off a mortgage and other outstanding debts
  • Support your family with a lump sum payment or regular income
  • Pay inheritance taxes
  • Support your business in the event of death of a key employee
  • Buy the shares of the deceased partner or shareholder

If you are already paying for life insurance and are a higher rate tax payer (40%), you could save up to 52% on your premiums, or up to 36% if you are a basic rate tax payer (20%). This does offer a substantial saving over the length of a policy.

insurance cover

A relevant life cover cannot be a joint policy with the employee’s spouse or children.

Critical illness cover

An employer can provide critical illness cover to key employees and this will enjoy the same tax treatment as relevant life cover.

This insurance is designed to replace the employee’s income if they become seriously ill. Typically, the insurance covers illnesses such as heart attacks, strokes, some cancers and conditions such as multiple sclerosis. More conditions can be included, based on the premium you are prepared to pay.

Please remember: RightCue Tax Advisers are not financial advisers and are not able to give financial advice. The information we have shared with you, is to help you make informed decisions in your business. We are always happy to recommend an independent financial adviser.


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