Can you put life insurance through a limited company?
Stephen Roddy
If you’re a director I can help you unlock a multitude of company benefits through tax-efficient insurance products that I’m authorised to advise and arrange using products that are exclusive to authorised advisers only.
Can you put life insurance through a limited company?
If you're a limited company director, you will be pleased to hear that rather than funding the costs of a life cover policy from your personal or post-tax income, your company can fund a relevant life policy (RLP), which provides death-in-service benefits similar to those provided by larger employers to their employees. The majority of directors that I advise normally have an existing personal life insurance plan in place, personal life insurance plans can not be put through the business.
What is a relevant life insurance policy?
A Relevant Life Plan offers a cost-effective way for an employer to arrange Life Cover on the life of an employee, with the benefit payable to the employee's family or financial dependants. This should be tax efficient for employers and employees, as long as it meets certain legislative requirements.
Can you have a joint relevant life plan?
Unlike personal life policies that are joint between two people where the policy pays out on first death and?then terminates, a relevant life policy can only include single life cover,?but you can have multiple life covers with different terms within the plan as long as they are all for the purpose of providing benefits for dependants. You cannot use the same plan for other key person or ownership protection benefits.
Who can have a relevant life policy?
Who is allowed to have one? Any employee of a business, including directors. The business can be a limited company, a partnership, a charity or a sole trader. However you cannot get cover for sole traders or equity partners?themselves?where they are taxed under schedule D.
Can a sole trader have a relevant life policy?
A sole trader in their personal capacity as a business owner is not eligible to take out relevant life cover, as a sole trader is not a legal entity and cannot get a policy through the business. However, a sole trader business owner can apply for a policy on behalf of an employee.
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?Is Directors Life Insurance Tax Deductible?
A solution has been developed in recent years that help directors and employees of small businesses benefit from life insurance that is paid for by the company and the premiums are?tax-deductible. This type of plan is called?relevant life insurance.
To Recap
Relevant Life Cover (RLC) allows employers to offer a death-in-service benefit to their employees. It’s a tax-efficient life insurance policy, set up by the employer and pays out a tax-free lump sum on the death (or diagnosis of a terminal illness) of the person insured. The proceeds go to the employee's family or financial dependants.
If you're a Director who's paying for your life insurance?from your personal income:
you could benefit by having a?relevant life insurance plan?that's put through the ltd company.
Key features