Relevant Life Cover with Critical Illness

Many large UK employers use group insurance schemes to offer Death-In-Service benefits which provide a financial lump sum to the beneficiary of an employee in the event of their death. 

However, smaller companies (with less than five employees) don’t typically qualify for such schemes. So, what options do small businesses have if they want to provide their employees with life cover? This is where relevant life insurance can help. 

This article takes a closer look at whether critical illness cover can also be included with a relevant life insurance  policy and why this option could be beneficial.

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Can relevant life cover include critical illness?

Yes, it’s possible. In addition to lump sum life cover, most relevant life insurance policies already include a provision to pay out in the event an employee is diagnosed with a terminal illness (such as cancer or dementia, for example).

However, there are some relevant life cover providers who can extend their existing policy coverage and also pay a lump sum benefit should an employee suffer a specific critical illness or incur a serious injury which may not be deemed terminal.

Each provider will have their own definition of what they would classify as a critical illness or injury.

The list would generally include:

A relevant life policy with critical illness (like all standard policies) will only pay out the sum assured on one occasion, therefore if you suffer a critical illness and receive the benefits then the policy will cease at this point.

If you’d like to know more about which providers can offer relevant life insurance with critical illness, get in touch and we can arrange for an advisor we work with to contact you directly.


What is the difference in cost if I include critical illness cover with a relevant life insurance policy?

Critical illness cover can prove to be an extremely valuable benefit to have in addition to your relevant life insurance. However, there will obviously be a difference in cost which may, in some circumstances, be quite significant.

The actual premium amount for a policy covering both life cover and critical illness will vary depending upon each applicant.

The key factors which will determine the cost of your cover will include:

  • Your age
  • The amount of cover you need and for how long
  • Your medical history (including your family)
  • General lifestyle (smoker/non-smoker etc)
  • Your occupation

Each provider will use their own internal guidelines to assess how much the premium will be, based on the information they receive. The best way to find the most competitively priced cover for your needs is to use the services of an independent advisor. This is where we can help.

If you make an enquiry we can arrange for an advisor we work with to get in touch and provide you with a range of quotations for this type of cover.


What are the benefits of including critical illness insurance with relevant life cover?

The key difference between a combined relevant life insurance plan with critical illness cover and a standalone policy is that the former will provide financial assistance which can alleviate any stress you may feel whilst you recover from your illness.

A standalone relevant life policy will simply provide financial assistance only in the event of your death (or, in some cases, upon diagnosis of a terminal illness).

A critical illness or injury can happen at any point in your life. Having this type of protection in place can provide crucial support for you and your family during a difficult time.


What are the other key benefits of relevant life insurance?

Relevant life cover provides an opportunity for small businesses to offer key employees and members of staff valuable support both for them and their loved ones during their tenure with the company.

The key benefits of relevant life cover include:

  • Free life cover for employees
  • Staff retention
  • Tax-free benefits
  • Benefits do not count towards the pension lifetime allowance
  • Can provide larger amounts of cover than traditional death-in-service benefits
  • Premiums are tax-deductible for employers
  • Premiums not classed as a benefit-in-kind for employees

Free life cover for employees

The premiums for a relevant life insurance policy are typically paid for by an employer, therefore, if you’re an employee of a business which offers this type of benefit then any life cover you receive would be completely free.

If you’ve recently become an employee of a business who provides death-in-service benefits you should still continue paying your premiums for any personal life cover you may already have in the event your circumstances change in the future.

For example, if you change jobs again and join an employer who does not offer this type of benefit then you still have your personal life insurance policy in place.

Staff retention

By their very nature, small businesses must rely on a finite number of staff in order to grow their venture. Relevant life cover provides a valuable benefit and will help retain high-calibre employees whose contribution is regarded as crucial to their employer’s long-term success.

Tax-free benefits

In the unfortunate event of an employee’s death, any lump sum benefit will be paid free of any income tax or inheritance tax liabilities for either the employer or an employee’s beneficiaries.

Benefits do not count towards the pension lifetime allowance

Any lump sum benefits received from a relevant life insurance policy remain outside an individual’s pension lifetime allowance (£1.055m for the current tax year, 2019/20), which makes them particularly attractive for anyone who has made, or intends to make, significant contributions towards their pension plans.

Can provide larger amounts of cover than traditional death-in-service benefits

Traditional death-in-service benefits through group insurance schemes usually only provide up to a maximum of four times an employee’s annual salary whereas relevant life policies tend not to have any cap on the sum assured.

Most relevant life insurance providers can offer a sum assured of at least £1 million, however, a few can go much higher than this if an insurable interest exists for a specific employee.

Premiums are tax-deductible for employers

All premiums from a relevant life cover policy are tax-deductible for the purposes of corporation tax for any employers who are registered as a limited company.

Premiums not classed as a benefit-in-kind for employees

Unlike a company car or private health insurance, for example, a relevant life cover plan is not classed as a benefit-in-kind and, therefore, does not have to be declared for tax purposes by any employee.

If you’re either an employer or employee of a small business and would like to know more about the benefits that relevant life insurance can provide, get in touch.


Speak to a relevant life insurance expert

Relevant life insurance provides a very healthy alternative for small businesses who are keen to provide this type of cover for their employees. The inclusion of critical illness with any policy provides additional protection and peace of mind for both employers and their staff.

The advisors we work with can discuss the benefits of this type of life cover in more detail. All advice is free and any information is always given in the strictest confidence. Call us on 0808 189 0463 or make an enquiry to get started.

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