Relevant Life Cover at Four Times Salary for Solicitors in a Law Firm
What was the situation?
Our client, an established law firm, had a modest group life insurance scheme in place. The firm wanted additional life cover, set at four times salary, for two of its solicitors. Their first instinct was to extend the group scheme to cover it.
What was the issue?
The arrangement also required administration as people and cover levels changed, returning the firm to the same annual cycle each time a new requirement arose.
What was the process?
Rob identified guaranteed insurability as the feature that made the difference, one the group scheme could not offer. Subject to the policy terms, cover could be increased following defined events, such as a qualifying salary increase or change in family circumstances, without further medical underwriting.
The firm could request an eligible increase during the policy year rather than wait for the group scheme’s anniversary. Each solicitor’s cover could therefore be reviewed when the need arose.
Rob also thought through what would happen if somebody left the firm. The selected Relevant Life policy could be assigned into personal ownership or continued through a future employer. This meant the policy could move with the person rather than ending automatically with their current employment.
What was the solution?
The plans were funded by the firm and established under Relevant Life trusts from outset, allowing each solicitor to nominate their intended beneficiaries in line with the trust terms. Subject to HMRC rules and the employer’s circumstances, premiums may qualify as an allowable business expense where the wholly and exclusively test is met and are not normally treated as a benefit in kind for the employee.
The value of Rob’s advice lay in identifying a structure the firm would not otherwise have considered, built around how their circumstances were likely to change. Eligible changes no longer had to wait for the annual scheme review, while the transfer options gave each solicitor continuity if their employment changed.
The outcome reflects the kind of case Rob is known for: recognising when a group scheme’s simplicity has become a limitation, and structuring cover that can move as quickly as the business does.
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Relevant life cover is being increasingly used by small businesses to attract and retain highly experienced employees as part of an attractive benefits package. The policy pays out a tax efficient lump sum amount in the event of the death or diagnosis of a terminal illness of the employee insured. This sum goes directly to your employee’s family or financial dependants.
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