Updated: July 30, 2019

Relevant Life Cover with Critical Illness

Do you run a small business and want to know what your group insurance options are? This guide will outline everything you need to know

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Pete Mugleston

Author: Pete Mugleston - Mortgage Expert

Updated: July 30, 2019

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.

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 with a life expectancy of less than 12 months.

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:

Most providers offer reduced payouts on critical illness cover for less severe claims, such as stage one cancer, that can just be treated with drugs may result in an insurer only paying out a percentage of the total sum assured. In these instances, the remaining balance is left available for future claims.

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.

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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 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 the cover will include:

  • Age
  • The amount of cover needed and for how long
  • Medical history (including your family)
  • General lifestyle (smoker/non-smoker etc)
  • 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 will 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 combines two benefits under one premium which is likely to be cheaper than having two separate policies.

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

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:

  • Life cover for employees
  • Staff retention
  • Benefits do not count towards the pension lifetime allowance
  • Premiums are tax-deductible for employers
  • Premiums not classed as a benefit-in-kind for employees

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.

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.

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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We can help! We know everyone's circumstances are different, that's why we work with brokers who are experts in relevant life cover. Ask us a question and we'll get the best expert to help.

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Pete Mugleston

Pete Mugleston

Mortgage Expert

About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

FCA Disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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