If you are a director of a company or small business, having a life insurance policy carries a lot of importance for you. In addition, if the life insurance premiums are made by your employer instead of you, you can save up to 50% on your tax payments and this is obviously not a small amount.
In place of buying an individual life insurance policy and making monthly payments from their net income, directors of companies can go for a relevant life insurance policy. Under this policy, the expenses which are otherwise payable by the director himself are borne by the employer. As a result, the employer can enjoy corporation tax relief since the amount spent for premium is counted as a deductible expenditure. Besides this, the policy and the underlying benefits are not considered as benefits in kind. As a result, the employer is not liable for payment of national insurance or income tax.
Why a Company Director Life Insurance policy is important?
Relevant life policy is an effective form of company director life insurance which offers the following benefits to the high-earning employees and company directors:
§ There are no financial obligations related to National Insurance
§ The company/employer makes the payments and there is no benefit in kind onus on the director
§ The dependants/beneficiaries of the directors get the tax exempt benefits
§ Tax relief under corporation tax regulations are available since premiums are regarded as business expenditure, given that they are paid “wholly and exclusively for trade” (similar to pension payments).
§ As a general rule, the benefits are offered with no levy of inheritance tax given that they are disbursed via a discretionary trust/charitable organization.
§ In company director life insurance policies, premiums are not included into the annual allowance of the directors
§ Benefits offered are not a constituent of the lifetime pension allowance offered to the directors
§ The plans have flexibility and can shift business with a director
§ Policies are valid till the age of 75 and not only the chosen age of retirement
§ Usually, the maximum amount guaranteed by the policy is 15 times the salary (along with other benefits) and £5,000,000, whichever is less
§ Individual payments for premiums can be made provided the director sells his stake or quits his job
§ The benefit or payout is tantamount to offering up to eleven times the salary as a one-time payment which can be put to generate revenue or purchase an annuity as a substitute to pension received by a dependent or widow or up to four times the salary in the form of death-in-service benefits.
However, at the time of signing up for this policy, company directors should remember that they are not allowed to include income protection or critical illness cover. The cover is also not available after the age of 75 years. With amendments in the respective statutes, small businesses can also make the most of relevant life insurance policy. So, companies and businesses with 5 or less number of directors can also put them into use.
Author bio: Sam Payn is an energetic blog writer who dedicates himself to writing attention-grabbing and informative articles and blogs on life insurance and other forms of insurance products.
I'm Louida from Atlanta, Georgia and I'm a mother of two daughters, and a full-time blogger/influencer.
I love helping others learn how to start working from home online free to help supplement their current income.
I also blog at Productreviewmom.com
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