Relevant life insurance is a type of life insurance that is specifically designed to provide financial protection for your business during unforeseen circumstances, such as an employee’s terminal illness, injuries or death. Unlike traditional life insurance policies, relevant life insurance policies offer several advantages to both the business and the employee who is insured.
To further understand what relevant life insurance is, we will discuss the benefits, who it’s relevant to and factors to consider when choosing this policy.
Benefits of Having Relevant Life Insurance
Tax Efficiency
Unlike other policies such as key man insurance, relevant life insurance is the only life-insured policy that is an allowable business expense and therefore provides businesses with tax relief.
Flexibility
When consulting with an insurance company, you can discuss and tailor your relevant life policy to meet your specific needs. Tailoring could include what level of coverage you want on the directors or even employees.
Employee Benefits
It’s a nice addition to your employee’s benefits knowing that in any case where they are unable to come back to work, their family is paid a lump sum to their beneficiaries. This shows your employees that you not only care about their families but you value them as an employee.
No Limits
With this business expense, there are no limits on how much and how many employees you have; therefore, you are never limited and there is room to change and expand your policy if you want.
Who Doesn’t Need Relevant Life Insurance?
While relevant life insurance can be a valuable tool for many businesses, it’s not always necessary for every business type. Here are some scenarios that might help you establish if it’s beneficial to your business.
Small Business with Few Key Employees
Having a small business doesn’t always mean you are relying heavily on a few key individuals, especially when it’s not a highly skilled service or product; therefore, the financial impact of an employee’s absence wouldn’t prevent the business from operating.
Businesses with Group Life Insurance
If you already have a life insurance plan that fits well with your and your employee’s needs, there is little motivation to swap, and adding relevant life insurance may not be necessary.
Low-Risk Industry Businesses
Industries where there is low employee turnover and a low-risk industry with very minimal safety hazards may not have an immediate insurance policy for businesses to take out and while this makes sense, it’s all the business’s discretion.
Factors to Consider
There are some additional factors to consider before taking out a relevant life insurance policy. You might have to begin with employee value assessment; here you will look at the financial impact of losing an employee or director.
Secondly, it’s important that you understand the potential negatives of taking out relevant life insurance. While it does have tax benefits and is flexible, there are still some potential drawbacks that wouldn’t be attractive to businesses.
There are always alternative options to consider before you invest in one policy. Have a shoparound for policies like executive income protection or key person insurance.