PUT YOUR LIFE INSURANCE ON EXPENSES WITH RELEVANT LIFE COVER
How do you know if relevant life insurance for your business? Our guide will answer the key questions you need to know about this insurance policy.
Put Your Life Insurance On Expenses with Relevant Life Cover
Life insurance is one of those things we all need but no one likes to talk about. Critical illnesses and death are, let’s face it, morbid subjects for discussion. Who wants to go there? No one, of course, but eventually it will come for us whether we like it or not so it’s best to be prepared.
In the case of small businesses with high-value employees who are important to your business, you may want to offer them a relevant life insurance policy as an inducement to stay with you. The employee doesn’t pay the premiums, the company does so the financial impact on them today is nil.
Death or critical illness presents a family with a financial emergency that needs to be dealt with regardless of the emotional upheaval they’re dealing with. In that case, the financial impact on the survivors will be tremendous, in a positive direction.
How Does Relevant Life Insurance Work?
For all the complete details you can visit mykeymaninsurance.com but we’ll give you a brief overview here.
Relevant life insurance refers to an employee who is highly relevant to your business. That is, they play a major role in the sales department, they perform valuable research, they lead a key department, and so on and so forth.
You want to retain them and their expertise for the company, but you can’t afford to pay the kind of salary they can command on the open market. Instead, you decide to offer them a relevant life insurance policy.
The company pays the policy premiums for as long as the employee remains with the company. If they die or fall critically ill while they are at the company, the policy kicks in and their family receives a lump sum payment from the insurance company.
This is a way to offer extra benefits to an important employee without having to increase their salary or bonuses. The policy is put in a trust separate from the employee’s estate, which helps with inheritance taxes too.
It’s not entirely a one-way street, however. Relevant life insurance policies are seen as business expenses that are tax-deductible, therefore they can be used to offset some of your corporate taxes.
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How Much Should the Person Be Insured For?
This is a variable that will be different in every situation. Things you need to consider are the person’s salary, how many people they have in their family, their bills such as their mortgage, as well as their monthly living expenses.
If those numbers are high, you’ll need a higher amount of coverage. If the person is single, or only has a partner who has their own high-paying job and very few bills, the amount of coverage would be less.
Can Relevant Life Insurance Be Used For Retirement?
No. The policy can be transferred to another company if the employee transfers their employment, at which point the new company would take over paying the premiums.
It is not a retirement policy though. It only pays out if something happens to the employee during their term of employment at the company.
The employee should have separate retirement planning for themselves, which they alone would be responsible for. The company wouldn’t be involved in that.
See Related: How Much Life Insurance Do You Really Need?
How Long Does It Take To Get A Relevant Life Insurance Policy?
This is another one of those questions that will depend on numerous variables. A typical policy with no unusual factors can be completed and become active in one to two weeks.
If there are health problems, if there is a large payout amount over £500,000, or if the employee is over the age of 50, then there would be additional constraints and it would take longer. Aside from that, figure about one to two weeks.
Is Relevant Life A Good Idea For My Company?
How important are your employees to you? If you want to retain the ones who are making money for you and growing your business, you certainly don’t want them leaving and taking all their expertise with them to a competitor.
You want them to stay, stay happy, and keep doing what they’re doing for you.
Offering them a way to take care of their family if anything happens to them, without it costing them a single penny, is a huge inducement. It shows them, in the most practical imaginable, that you care about them and their family.
They’ll return that loyalty with their own loyalty to you in return.