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Many SME business owners would love to offer their employees financial support such as life insurance. However, setting up a group scheme may not be the best option, especially if you don’t have many employees.
There is however another option in the form of relevant life cover which can be set up on an individual basis. You can, therefore, tailor the cover amount and duration for each policy.
So, why do only 30% of SMEs know about it?
A study by Legal & General found that over 86% of businesses with profits less than £50,000 were not aware of the product, with 80% of businesses set up in the past two years having no idea such product exists.
The study also found that 73% of businesses were open to the concept of relevant life cover after they understood the concept.
What is relevant life cover?
Relevant life cover is a life insurance policy that allows you to offer a death-in-service benefit to your employees. It is paid by your company but pays out to your employee’s beneficiaries upon the event of their death.
It is typically used by businesses that aren’t large enough to establish a group life scheme, but it can also be helpful for high-earning employees who might exceed their personal pension lifetime allowance. This means that, depending on how your group life scheme is set up, a claim may be included in the employee’s pension fund, whereas claims paid under relevant life cover never count towards a person’s lifetime allowance. It is also beneficial for members of group life schemes who want to top up their benefits as some group life schemes can be restrictive.
How does relevant life cover work?
Relevant life insurance is much like a normal life insurance policy. An individual is assessed based on how much cover is required, their health, age and lifestyle.
The only difference is that you can place the ownership under the company meaning that the business pays the premiums and offset the costs as a taxable expense. If the insured person dies while working for the company, a tax-free pay-out will be made to their beneficiaries.
Relevant life cover can either be for a set amount or linked to inflation so that the pay-outs reflect the cost of living at the time of payment.
There are many benefits to both relevant life cover and group life insurance, and it will be dependent on your business’s individual needs as to which is the best fit for you, if not both.
Here’s a quick rundown of the main differences and similarities of relevant life cover and group life insurance:
Offering relevant life cover has many different benefits:
Although not technically an employee benefit, there are many positives that arise when you have implemented relevant life cover:
If you are interested in finding out more about relevant life cover or group life insurance, call us on 0330 333 9100 or email us at firstname.lastname@example.org.