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Relevant Life Cover

Relevant Life Cover is a tax-efficient life insurance policy, allowing companies to offer a death-in-service benefit to its employees (including salaried directors). It's set up by the company and pays out a tax-free, lump sum on the death (or diagnosis of a terminal illness) of the person insured. The proceeds go directly to the employee's family or financial dependants.

Features included as standard

  • Counts as a tax-deductible business expense
  • The premiums are paid monthly
  • Guaranteed premiums
  • Benefits usually free from inheritance tax

Options

  • Level or inflation-linked cover
  • Guaranteed increase options
  • Cover up to £10 million

Additional services

  1. Access to the LV= member helpline gives 24/7 access to health advice, counselling services and expert legal advice
  2. LV= Doctor Services gives the insured employee access to six medical services via one simple app or phone call
  3. LV= Business Care which gives your clients free access to legal and tax experts available at the end of the phone, when they need them

A closer look...

As the policy is written as Relevant Life Cover under subsection 393B(4) of the Income Tax (Earnings and Pensions) Act 2003, your employee will not be taxed on the premiums you pay as a benefit in kind.

Claims paid from this policy won’t be subject to either income tax or capital gains tax.

As you’re insuring someone else and the policy is written into trust, the lump sum we pay out will go straight to the trustees of the policy. This means that it isn’t included in the estate of the person insured, so no inheritance tax will apply. For this reason it is essential that the policy is written into trust otherwise the policy may not demonstrate the anticipated tax efficiency.

How much tax you and your employee pay depends on your circumstances. Any references we make to taxation are based on our understanding of current legislation and HM Revenue & Customs practice, which can change.

The policy premium is paid every month by Direct Debit until the month immediately before the end date of the policy, or until we pay out a claim if this is earlier.

Your clients can choose to stop paying premiums at any time, but if they do then your policy will stop, they won’t be covered and you won’t get anything back.

This policy has no cash in value at any time

The premium is guaranteed. This means we won’t change it unless you ask us to change the policy or, unless you inflation-linked cover has been chosen.

Inflation-linked cover your cover will increase by inflation each year and premiums will increase by inflation multiplied by 1.5.

As the policy is placed in a discretionary trust, it does not form part of the deceased's member’s estate for inheritance tax planning purposes.

However, there are some situations in which there could be some inheritance tax to pay on the assets held in trust.

  1. A periodic charge may apply from the 10th anniversary the trust was created
  2. An exit charge may apply when anything is paid out from the trust

These charges are based on the value of the trust assets at the time. They’re unlikely to apply unless the lump sum paid out on death is held within the trust rather than being distributed straight away.

All of our features are covered in full in our policy documentation.

Read below a summary of the relevant product information about Relevant Life Cover, in accordance with the Insurance Distribution Directive. Designed to help you make an informed decision and comparison for your client, we set out the product’s target market, distribution strategy, suitability, main features, risks, options and costs.

This information is also available in downloadable pdf format.

This is only a summary of the product features. For more information please read the Key Features document and Policy Conditions.

Relevant Life Cover is a tax-efficient life insurance policy, allowing a company to offer a death-in-service benefit to its employees (including salaried directors). It's set up by the company and pays out a tax-free, lump sum on the death (or diagnosis of a terminal illness) of the person insured. Because the policy is written into a discretionary trust the proceeds go directly to the employee's family or financial dependants.

Relevant Life Cover might benefit businesses that are too small for a group life scheme, have high earning employees who might exceed their personal pension lifetime allowance or have members of group schemes who want to top up their benefits.

Relevant Life Cover is not suitable if someone is a non-salaried director of a Limited Company, an Equity Member of an LLP or a sole trader, however this policy can be set up for a PAYE employee of a sole trader.

To ensure your clients receive the right level of protection, we believe this product should be sold on an advised basis, face to face or over the phone.

It’s important to regularly review your clients’ circumstances and protection needs to make sure their cover is appropriate.

  • Pays a cash lump sum on death during the term
  • Terminal Illness cover is included at no extra cost
  • Level or inflation-linked cover
  • Guaranteed premiums
  • We won't pay a claim if the insured dies as a result of intentionally taking their own life in the first 12 months of the policy
  • We won't pay a terminal illness claim in the last 12 months of the policy
  • This policy is not suitable for clients who want to cover their employees against a critical illness or protect their income should they be unable to work due to accident and sickness
  • After the plan has been issued, your clients won't be able to change it
  • There is no cash in value at any time
  • If your client stops paying their premiums, their cover may cease
  • If your clients choose level cover, it won't keep up with inflation and could buy less in the future
  • If the Government changes the tax treatment of protection products like Relevant Life Cover, the amount of cover paid out on a claim , taxation of premiums or claim payments, or the premium you pay for cover could change
  • There is no minimum amount of cover; the maximum amount is £10 million
  • The minimum term is 5 years and maximum term 45 years. The policy must end before the person insured reaches the age of 75 (for level cover) or age 70 (for inflation-linked cover)
  • Clients take out a policy on a single life, life of another basis for their employees or directors (if salaried)
  • The policy will only pay out once, on the first death (or diagnosis of a terminal illness) and will then end
  • The policy must be written into a Discretionary Trust at the start of the policy with the employee’s family or dependents as beneficiaries. The beneficiaries must either be individuals or a charity, so it can’t be assigned to a mortgage lender for example. If the policy is not written into a trust, and the beneficiaries are not individuals it won’t fulfil the legislative requirements for a Relevant Life policy, which could have tax implications.
  • The premiums are paid for by the employer and unlike group schemes, usually treated by HM Revenue & Customs as a business expense

To apply clients must be:

  • A business registered in the UK
  • Permanently living in the UK

And the person insured/employee must be:

  • Aged between 17 and 69 (for level cover)
  • Aged between 17 and 59 (for inflation-linked cover)
  • Clients can only set this policy up on a life of another basis and the policy must be put into a Discretionary Trust with the employee’s family or dependents as beneficiaries

Is suitable for:

  • Providing a lump sum payment in the event of death, or terminal illness
  • Employers (Limited Companies and Limited Liability Partnerships) who wish to provide lump sum death in service benefits for their key employees
  • Employers who wish to provide additional life cover for their high earning employees who already have employer life cover under a group scheme and the cover exceeds the life time allowance
  • Employees need for cover expires before they reach age 75 for level cover and age 70 for inflation-linked cover as these are the maximum ages at which the policy can end
  • Employers who wish to provide additional life cover for their high earning employees who already have employer life cover under a group scheme and the cover exceeds the life time allowance
  • Clients who want guaranteed premiums

Is not suitable for:

  • Personal protection (this policy only provides death in service cover and must be taken out by an employer)
  • Covering a mortgage (as the policy cannot be assigned to a lender)
  • Those looking to provide a lump sum if the person insured is diagnosed with a critical illnesses
  • Those looking for business protection to cover the loss of a key person, to provide finances to purchase shares of director or partner in the event of their death, or to cover an interest only business loan
  • Businesses not registered in the UK
  • Employees who don’t have any financial dependants. We believe this product is unlikely to be suitable
  • Non-salaried directors of limited companies (those who aren’t taxed under PAYE) and equity members of an LLP
  • Sole traders or partnerships as they are considered to be self-employed

Guaranteed Increase Options: Your client can increase the amount of the cover, if certain events happen and they are eligible. If your client changes the amount of their cover using one of these options, their premium will also change to reflect this. The premium will be based on the age and smoker status of the person insured at the time of change. For more details, refer to the Policy Terms and Conditions.

If the person insured (employee) leaves the company: There are a number of options including stopping the plan and ending the trust, or issuing a new policy, on the same terms as the existing contract, to the individual or to their new employer. For more details, refer to the Policy Terms and Conditions.

Member benefits: With this policy the insured person automatically becomes a member and is entitled to a range of benefits, at no added cost. These include voting rights, free advice helplines and discounts on selected LV= products. These benefits are non-contractual and can be changed or removed at any time, and conditions apply. More details about LV= membership and member benefits are available at LV.com/members.

LV= Business Care: For all new policies (from 1 October 2015), we offer the policyholder (the business) telephone access to free specialist advice in business and commercial law, business tax and VAT. Provided at no added cost, these services are non-contractual and can be changed or removed at any time, and conditions apply. More details about LV= Business Care are available at LV.com.

LV= Doctor Services: For all new policies (from 1 September 2018), the person insured under the policy has access to a number of app and phone based medical services and advice, at no added cost. These include virtual GP consultations, prescription, second opinion, Remote Physiotherapy, Remote Psychological Services and Discounted Health MOT’s. These benefits are non-contractual and can be changed or removed at any time, and conditions apply. For more details visit LV.com.

The policy premium also includes a fee, which is as fixed monthly amount, to cover administration and support costs.

LV= Business Care and LV= Doctor Services are provided by third party companies. These services are not regulated by the Financial Conduct Authority or the Prudential Regulation Authority.

Relevant Life Cover is arranged on an individual and life-of-another basis with the employer as the policy holder, and the employee as the person insured. Relevant Life Cover premiums are paid for by the employer, and unlike group schemes, usually treated by HM Revenue & Customs as a business expense.

The premiums and benefit paid won’t count towards the employee’s lifetime pension allowances, offering an attractive life insurance option for people with a large pension pot.

Please note: The current standard pension Lifetime Allowance is £1.03 million (2018/19 tax year), which is due to rise to £1.055 million in April 2019 (2019/20 tax year). Any pension benefits taken above this limit is subject to a Lifetime Allowance Tax charge of 55% if taken as a lump sum and 25% if taken as income. This includes any life insurance written under pension rules, for example group insurance schemes.

Many employers choose to set the amount of cover as a multiple of their employee's salary. LV= calculates a suggested maximum amount of cover based on the employee's age and gross annual earnings.

How the cover works

The company insures the employee/s and polices are written into a discretionary trust. If the named employees dies or is diagnosed with a terminal illness, the money is paid to the trustees. The trustees then pay the money to the named beneficiaries.

Tax implications

HMRC usually treat the premiums as an allowable business expense (so not included as a P11D benefit), providing the local Inspector of Taxes is satisfied they qualify under the ‘wholly and exclusively’ rules. This means the premiums and benefits usually qualify for relief on:

  • Income tax
  • Capital gains tax
  • Corporation tax
  • National insurance

Find out more about tax implications

Discretionary trust

All Relevant Life policies must be written into a discretionary trust. Unlike most other types of trust, discretionary trusts offer flexibility if a new discretionary beneficiary needs to be added at any point. If circumstances change it can be altered by the trustees to make sure it’s still effective.

When a discretionary trust is set up, the employee will name all of the people that may want to benefit from it in the future. This can be specific people or groups (such as children or grandchildren). The employee can use a nomination form to specify how they’d like the assets to be split. However, the trustees can decide if they want to follow these instructions or not.

This information is about our discretionary trust for Relevant life Cover. For other types of trusts, please visit our trusts section.


Case studies

The case study below is designed to illustrate some practical advantages offered by our Relevant Life Cover and potential tax savings. It shows how this policy could help your clients, but please note that this is an example only and is not based on a real company.

Amanda

Amanda
Business owner

AW Design Ltd.

Amanda is the sole shareholding director at AW Design Ltd and employs two designers, Leo and Sam. Amanda wants to provide life insurance for herself and her employees, but avoid the costs associated with group life schemes.

Leo and Sam

Leo and Sam
Employees

green arrow pointing down
Green tick in a circle

The company takes out three separate Relevant Life Cover policies on the lives of Amanda, Leo and Sam and placed into discretionary trust.

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  1. One of the employees, Sam, is involved in an accident and dies.
  2. Sam’s family makes a claim under the Relevant Life Cover policy.
  3. LV= pay the proceeds to the trustees.
  4. The trustees pay the beneficiaries (Sam’s family) the proceeds.
  5. Because the policy was written in trust, inheritance tax doesn’t apply.

Amanda Wilkins is the sole shareholding director of a small graphic design consultancy, AW Design Ltd. She works full-time, and employs two designers; who have both been at the company for a number of years. Amanda is proud of the business she’s built and values the roles that Sam and Leo have played.

Amanda feels that she should provide life cover for herself and her employees and speaks to her financial adviser who suggests that she considers LV= Relevant Life Cover for all three of them. The adviser also mentions that setting up a group life scheme would not be appropriate due to the administration costs involved and the size of the business.

All polices would be written in trust and Amanda, Sam and Leo would each name their beneficiaries. These are usually a next of kin. If one of them died whilst working at AW Design Ltd, the claim would be made by the assigned trustee and then paid to the named beneficiaries.

This is how the costs would work, assuming that the premiums qualify as an allowable business expense.

Cost type

Amanda

Leo

Sam

Monthly premium

£90.00

£65.00

£42.00

Employee National Insurance Contribution

N/A

N/A

N/A

Income Tax

N/A

N/A

N/A

Total company gross cost

£90.00

£65.00

£42.00

Less Corporation Tax (assuming 19%)

£17.10

£12.35

£7.98

Tax-adjusted total premium

£72.90

£52.65

£34.02

These figures are for illustrative purposes only. Tax calculations are based on 2018/2019 tax rules and may change in the future. The information assumes that the same rate of income tax/national insurance applies to the whole of the premium. It may be affected by individual circumstances.

Andy

Andy High-earning employee

Miller Property Group

Andy has a substantial pension pot (£1 million) but wants an additional £800,000 life insurance policy with any proceeds paid to his wife, Sally.

Sally

Sally
Andy’s next of kin

green arrow pointing down
Green tick in a circle

The company takes out a Relevant Life Cover policy on Andy's life and places the cover into discretionary trust with Sally nominated as a beneficiary.

green arrow pointing down
  1. Andy dies in a skiing accident
  2. Sally makes a claim under the RLC policy
  3. LV= pay the proceeds to the trustees.
  4. The trustees pay the beneficiaries (Sally) the proceeds
  5. Because the policy was written in trust, inheritance tax doesn’t apply.

Andy Taylor is employed as a managing director of a property development company and has £1m saved in his pension pot. He’s 44 and married to Sally, together they have three young children. He’s very active and enjoys playing 5-a-side football and running around looking after his children.

Whilst Andy is healthy, he worries about what would happen to Sally and the children financially if something were to happen to him.

As a tax efficient solution, his financial adviser recommends his company takes out LV= Relevant Life Cover with £800,000 of cover written in trust, nominating Sally as a beneficiary. So, if Andy died (or was diagnosed with a terminal illness) during the term, the trustees of his Relevant Life Cover would receive £800,000. This would then be paid, tax-free to Sally, giving her enough money to pay off the remaining mortgage on the family home and hopefully live free from financial worry. And although Andy has a substantial pension pot of £1million, the £800,000 payment wouldn’t count towards his personal allowance. This means his family could receive all the money they were entitled to.

This is how the costs and possible savings would work compared to personal Life Insurance.

To who

Cost type

Personal - Life Insurance (from net salary)

Relevant Life Cover

Cost to Andy

Monthly Premium

£98.32

£ N/A

Employee National Insurance Contribution

£3.39

£ N/A

Employee Income Tax

£67.81

£ N/A

Cost to the company

Monthly Premium

£ N/A

£98.32

Employer National Insurance Contribution

£23.39

£ N/A

Total Gross Cost

£192.91

£98.32

Less Corporation Tax Relief

£36.65

£18.68

Tax adjusted Total Cost

£156.26

£79.64

Total saving with a LV= Relevant Life Cover Plan

£76.62

A saving of

49%

These figures are for illustrative purposes only. Tax calculations are based on 2018/2019 tax rules and may change in the future. The information assumes that the same rate of income tax/national insurance applies to the whole of the premium. It may be affected by individual circumstances. The example is based on a 40% tax payer, paying NI at 2%.

Great reasons to choose LV= for Relevant Life Cover

Strong claims performance

Making sure your client has a successful claim is as important to your client as it is to you. Your clients get vital financial help when they need it most and you feel confident in the provider you recommended.

We’re proud of our performance with 95%* of Life Insurance claims were paid in 2018 and a total value £32.6m claims paid.

*These figures include claims paid for both our Life Insurance and Lifetime+ products. Our Lifetime+ product is no longer available.

Better underwriting

We know advisers are not usually medical experts so we help out as much as we can. This means you can concentrate on providing the best financial advice for your client.

  • We have no standard exclusions on our income protection plans making it straightforward to explain to your client.
  • Our online application system is powered by a strong, intelligent underwriting rules engine which means that you're more likely to get an instant decision.
  • We have flexible medical examination arrangements. If your client needs a medical examination, where possible we'll make sure that they're seen by their local GP, and if appropriate, offer a suitable alternative with our nationwide healthcare networks.
  • We pay for medical underwriting (except medical certificates such as sick notes).
  • We have a dedicated underwriting hotline to help you iron out any potential issues your client may have.
Value add services

LV= Doctors services

LV= Doctor Services gives the insured employee access to six medical services via one simple app or phone call.

  • Remote GP
  • Prescription Services
  • Second Opinion
  • Remote Physiotherapy
  • Remote Psychological Services
  • Discount health MOTs

Member benefits

Every client who is covered by one of our personal or business protection and retirement products automatically becomes a member of LV=. This means they are entitled to a range of added benefits and support. These include free and unlimited access to our 24/7 confidential member helpline and discounts on a number of LV= insurance products.

Our LV= member helpline gives you 24/7 access to health advice, counselling services and expert legal advice.


LV= Business Care

LV= Business Care is designed for small business owners and is available as soon as your client takes out LV= Business Protection cover. Our service gives your clients free access to legal and tax experts available at the end of the phone, when they need them.

Our service offers advice in two key areas, Legal and Tax;

Business legal advice

Direct access to legal experts specialising in business and commercial law; covering areas such as;

  • Employment law and tribunal claims
  • Health & Safety law and requirements
  • Disputes including tenancy and debt recovery
  • Commercial and contractual disputes

Advice is available 24 hours a day, 7 days a week

Business tax and VAT advice

Direct access to business tax and VAT experts made up of accountants and ex HMRC employees, covering areas such;

  • Tax and VAT relief
  • Completing a self-assessment return
  • Current and changes to tax rules
  • Dividends paid from limited companies
  • Receiving a tax investigation notice

Advice is available Monday-Friday 9am-5pm

To help justify your Business Protection recommendation, we’ve produced a set of standard suitability paragraphs for you to use. You can include these in your suitability letter and save it in your client’s file.

The paragraphs explain how LV= Business Protection works and some of the options available. They cover the core reasons for choosing Business Protection only – you may want to add your own wording. Although these paragraphs have been approved by LV=, you should check with your own compliance department before using them.

LV= has taken every care to ensure these paragraphs are accurate, although you’re responsible for ensuring they’re used to accurately reflect the advice and recommendations you've made to your clients

Suitability wording

We’ve produced a range of template paragraphs that are designed to describe generic features of each type of policy, as well as the specific benefits of our own products. You can use and adapt these paragraphs to help construct your own Suitability Letters.

Use the drop down menu to select the relevant section, then copy and paste it into your suitability letter.

 

A good suitability letter is:

  • your opportunity to justify and reinforce the reasons for your advice and recommendations
  • an excellent opportunity to document unmet and future needs and the importance of ongoing review discussions
  • your record of the discussions held and the recommendations made/not made and why

It should be clear, fair and not misleading. It should be personal, explain the reasons why a recommendation has been made and how it meets the customers needs and objectives. It should highlight any risks involved.

LV= has taken care to ensure the accuracy of the information at the time of issue but does not accept liability resulting from your use of it.

Calculators

Relevant Life Calculators

This helps you work out how much cover to recommend as well as the potential cost savings compared to your traditional life insurance policy.

Before you use our calculator, you should have the company and employee tax rates to hand, although we do provide drop down options for you to choose from.

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How we use personal information. Find out how we use your personal information, and what rights you have by visiting How we use your personal information. This includes who we are, how long we hold information, what we do with it and who we share it with.


Underwriting support

Pre-underwriting helpline

Go straight through to our underwriters who can quickly answer questions like exclusions or loading.

Email: [email protected]
Call: 0800 678 1893
8:30am to 6:30pm Monday to Friday
TextDirect: first dial 18001

Tele-interview service

Our underwriters may need more information on either a particular area, or simply in relation to the amount of cover applied for.

Our team of friendly, fully trained UK based tele-interviewers, will call your client to gather details of their health and medical history so we can assess their application. This usually takes between 20-30 mins.

You can read our Tele-interview guide to help prepare for ain interview.

Tele-interview booking service

You or your client can book a tele-interview appointment with us directly online within 30 mins, without having to contact our new business team.

  1. It's usable as soon as you have the policy number.
  2. It shows all of the appointments available.
  3. You can book appointments as early as an hour after submission or up to seven days in advance.
Underwriting and financial limits

Age next birthday

TI*

PSR**

Cotinine**

ME

HIV

GPR

PROF

EXECG

To age 35

£750,001

£900,001

£900,001

>£2m

>£1.5m

>£1m

>£2m

>£7.5m

36-40

£600,001

£900,001

£900,001

>£2m

>£1.5m

>£1m

>£2m

>£7.5m

41-45

£500,001

£800,001

£800,001

>£2m

>£1.5m

>£1m

>£2m

>£5m

46-50

£400,001

£700,001

£700,001

>£1m

>£1.5m

>£1m

>£1m

>£4m

51-55

£250,001

£550,001

£550,001

>£1m

>£1.5m

>£1m

>£1m

>£3m

56-60

£200,001

£450,001

£450,001

£750,001

>£1.5m

>£1m

>£1m***

>£2m

61-65

£100,001

£250,001

£250,001

£500,001

N/A

>£1m

>£1m***

>£1.5m

Over 65

£75,001

£150,001

£150,001

£250,001

N/A

>£1m

>£1m***

>£1m

* TI not required if PSR or ME or GPR required. ** PSR not required if ME required. *** PSA included. **** Cotinine required on non smokers only

Make a claim

Making a claim on behalf of your client

You can contact us in the following ways to notify us that your client wishes to make a claim;

  1. phone: 0800 756 5869
  2. email: [email protected]
  3. post: LV= Health Claims Team, Emperor House, Grenadier Road, Exeter Business Park, Exeter, EX1 3LH

The information we need

For most claims, we’ll send your client a claim form. This should be completed, and include the name and contact details of your client's GP or medical specialist, as well as any supporting medical or financial evidence requested in the claim form. We may also ask for:

  • Basic details of the reason your client is unable to work.
  • Financial evidence as detailed in the claim form.

Paying the claim

  1. We’ll keep your client (and you) informed throughout the claim.
  2. We'll contact your clients GP or medical specialist directly to follow up on any outstanding requests for medical evidence.
  3. We’ll let your client know if there’s anything they can do to speed up their claim payment.
  4. We’ll normally pay the claim within 48 hours of receiving all the required evidence and making a final decision.
Claims performance

In 2018 we paid 95%* of life insurance claims

Here at LV=, we offer a clear and fair approach to paying claims, as we believe anyone can be affected by long-term illness – regardless of age or lifestyle. Take a look at our full 2018 claims performance.

Protection summary 2018

Life*

Total value of claims paid

£32.6m

Average annual benefit/payment

£56,659

Highest annual benefit/payment

£675,000

Policy in force duration

9 yrs 2 mths

Ave. age customer at claim

Life*

Male icon

Male

63

Female icon

Female

63

An icon of a man and lady

Youngest customer

24

*These figures include claims paid for both our Life Insurance and Lifetime+ products. Our Lifetime+ product is no longer available.

Detail

Relevant life cover

Type of payout

Lump sum

Type of cover

Level/inflation-linked

Term

Between 5 and 45 years

Minimum age attained at entry

17

Maximum age attained at entry (level)

59

Maximum age attained at entry (inflation-linked)

69

Maximum age attained at end of policy term (level)

74

Maximum age attained at end of policy term (inflation-linked)

69

Minimum premium

£5 a month

Maximum cover

£10 million

Basis

Single life, life of another under discretionary trust

Terminal illness

Included

Eligibility criteria

  1. The insured person must permanent live in the UK and be a PAYE employee of the business taking out the plan.
  2. The business taking out the plan must be a UK registered business (i.e. not available to partnerships and sole traders)
Telephone icon

Contact us about Relevant Life Cover

Quotes and questions: 0800 678 1890

FOR UK FINANCIAL ADVISERS ONLY
LV=, County Gates, Bournemouth, BH1 2NF, UK