Why Relevant Life might be right for your business owner clients
By offering a tax-efficient and cost-effective way for company directors to arrange a death-in-service policy for themselves or selected staff, Relevant Life cover is likely to be an attractive option for your business owner clients writes Gary King, Head of Protection Specialists Vitality
In recent decades, entrepreneurial spirit and start-up culture has led to a big increase (59%) in the business population since 2000 1.
Much of that rise has been driven by an increase in SMEs (small and medium-sized enterprises), particularly micro-businesses with no employees. SMEs now account for 99.8% of the business population2 and are rightly regarded as the lifeblood of the UK economy.
Despite the large number of UK businesses, it remains an often-untapped market as far as protection advice is concerned and many business owners lack adequate protection to safeguard themselves, their business and their family.
There are a range of Business Protection Insurance options on the market to consider, including Key Person and Shareholder Protection. One valuable yet often overlooked option is Relevant Life Insurance. A Relevant Life Plan (RLP) offers a tax-efficient and cost-effective way for company directors to arrange a death-in-service policy for themselves or selected staff, paying out a lump-sum to their loved ones if they to pass away.
Where the business has a co-director or employs a very small number of people, arranging individual Relevant Life Plans for those employees can also offer a suitable alternative to a Group Life Scheme, which may require a minimum number of employees to be eligible or have a higher minimum premium. Additionally, an RLP could be used as an employee benefit for a key individual or as a means of attracting talent, if the business doesn’t offer group death-in-service to the wider staff.
The tax efficiency of a RLP is especially attractive, as the plan counts as a tax-deductible business expense and there are no National Insurance contributions for both the business or the director/employee, so it’s a win-win on both fronts.
In the current climate for business owners, especially where tax breaks are being marginalised, the ability to arrange hugely important life cover, but in a tax efficient way should make it a relatively easy conversation starter, especially when the savings are laid out.
Moreover, with Vitality your clients can add our unique Optimiser and pay up to 25% less upfront compared to a standard premium, unlocking significant savings for them and their business at a time when that’s likely to be valued more than ever. In 2023 alone for example, Vitality members saved £43m with Optimiser 3.
Furthermore, whilst everyone gets access to the Vitality Programme – which encourages our members to take steps to a healthier future and rewards them with financial benefits - with Optimiser your clients will receive access to the extended range of discounts and rewards; from discounted monthly gym fees, discounted annual health screenings to money off travel and hotels. And with Optimiser, they’re more likely to engage due to the incentives involved.
With Relevant Life Plans typically only providing cover in the event of death or terminal illness, which given most people’s inherent optimism bias and belief that ‘it won’t happen to them’ can make life cover a harder sell, the Vitality Programme means your business owner clients can get something back for their premiums, without even having to claim. Better still, it can help them to actually live longer – up to five years longer for our most engaged members 3.
This also turns the Relevant Life Plan into a richer, more comprehensive employee benefits package - beyond just providing a death-in-service benefit - making it more attractive if hiring and retaining top talent.
Finally, it’s also worth pointing out that plans are portable as well, meaning if the business owner winds up their business – not uncommon with limited company contractors – or the employee leaves, they can use the flexible continuation option and take the plan with them.
In conclusion, a Relevant Life Plan is a smart, tax-efficient solution for business owners looking to protect their loved ones and, if necessary, as a benefit to attract top talent. By offering significant financial benefits and promoting a healthier lifestyle, it provides value beyond traditional life insurance. What’s not to like.
1 Business statistics - House of Commons Library
2 UK Small Business Statistics | FSB Business Data
3 Vitality Life Claims and Benefits Report, 2024
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