Relevant life insurance for directors
A tax-efficient life insurance policy set up and paid for by your limited company. Your company gets tax relief on the premium, your family gets the tax-free lump sum, and none of it touches your income tax or National Insurance.
- Premium treated as a business expense — cuts corporation tax
- No P11D benefit in kind, no income tax, no NI
- Written in trust from day one — outside inheritance tax
- Works for a single director with no other employees
What is a relevant life policy?
Also known as a relevant life plan
Relevant life insurance is a type of life insurance set up by your limited company, giving a company director personal life cover as a business expense rather than a personal one. It's a tax-efficient life insurance policy: your company gets tax relief on the premium, you get life cover for your family, and none of it touches your income tax or National Insurance.
A relevant life policy is arranged by an employer — most often a limited company — on the life of a director or employee. Unlike a group life insurance scheme, which needs several staff to set up, a relevant life plan works for a single director with no other employees, which is why it's the go-to relevant life insurance cover for owner-managed businesses.
The policy is written in trust from the outset. That means the trust, not your company and not your estate, controls the payout, so the money reaches your family without being subject to inheritance tax. HMRC treats the premium as a business expense for tax purposes, provided it meets the “wholly and exclusively” test that applies to any business expense.
It's designed to provide life cover for an employee or director in a way that's more tax-efficient than a traditional life insurance policy bought personally.
How relevant life cover works
Your limited company — which must be based in the UK — takes out the relevant life plan and pays the premium every month. Because the plan is classed as a business expense, the premium is normally deducted before corporation tax, which is one of the main reasons directors and employees prefer it to a personal life policy.
- Your company applies for the plan as an employee benefit and pays the premium
- The relevant life policy is written in trust for your chosen beneficiaries from day one
- If you die, or are diagnosed with a qualifying terminal illness, during the term, a tax-free lump sum is paid to the trust
- The trustees pass the lump sum to your family — it's never paid to a limited company or your personal estate
Because it's treated as a business expense rather than income, the plan doesn't create a P11D benefit in kind, and it isn't classed as a dividend or salary — so there's no extra tax liability for you personally.
Benefits of relevant life insurance
A tax efficient way to cover directors: the premium is funded before tax, so you typically get more cover for the same monthly cost as an equivalent personal life insurance policy.
Corporation tax relief
The premium is treated as a business expense, reducing your company's tax liability on corporation tax.
No income tax or NI
There's no income tax or National Insurance charge on the premium and no P11D benefit in kind for you personally.
Tax-free lump sum
The payout is paid tax-free and isn't subject to inheritance tax, because the policy is written in trust from day one.
Outside pension allowance
Sits outside the pension lump sum and death benefit allowance — unlike some registered group life schemes.
Reflects real income
Cover is based on salary and dividends, not just a basic salary figure — so directors aren't underinsured.
Portable if you leave
The trustees can assign the plan to you personally if you leave, retire, or the company closes down.
Relevant life plans vs a personal life insurance plan
Relevant life insurance plans and a standard personal life insurance plan pay out in the same way — a tax-free lump sum to your family. What changes is who pays and how it's taxed. A personal life insurance plan is funded from income you've already paid tax on. Relevant life insurance plans are funded by your company as a business expense, before any of that tax is deducted.
For most directors, that difference alone makes relevant life insurance plans considerably cheaper, pound for pound, than an equivalent personal life insurance plan bought outside the business.
How much relevant life insurance cover can you have?
The level of cover available depends on your age, health, life expectancy and total remuneration — salary, dividends, P11D benefits and pension contributions combined, not just your basic salary. Insurers calculate the maximum amount of cover using a multiple of your income, similar to how a group life scheme calculates death-in-service benefit, but with more flexibility because the plan is individually underwritten.
As a rough guide, most insurers will consider up to 25-30 times total remuneration for younger applicants, tapering down with age — though this is illustrative only and depends on the provider's own underwriting rules. We'll run the actual numbers for your company and income on a call.
Relevant life insurance cost: what affects your premium
How much does relevant life insurance cost? It depends on your age, health, the level of cover and the length of the term — the same factors that drive any life insurance policy. Because the premium is paid by the company as a business expense rather than from taxed income, the net cost to you personally is usually lower than an equivalent traditional life insurance policy, even where the headline premium looks similar.
Premiums are usually reviewable rather than fixed for the whole term, so the insurer can adjust them as the plan progresses. Guaranteed premium options exist with some providers. We'll set out exactly how your relevant life insurance cost compares to a personal policy before you commit to anything.
See what relevant life looks like for your company
Tell us your age, income and the level of cover you have in mind. We'll compare relevant life insurance plans across the market and come back with illustrative quotes — no obligation.
Corporation tax, benefit in kind and the tax implications of relevant life insurance
The tax implications of relevant life insurance are the main reason directors set these plans up in the first place. In most cases the premium is treated as a business expense and can be deducted against your company's profits before corporation tax — provided HMRC's rules on business expenses are met. It isn't classed as a P11D benefit in kind, so there's no income tax charge for you personally.
Tax relief, inheritance tax and the lump sum payout
Your company can get tax relief on the premium against corporation tax, in the same way as any other legitimate business expense. Because the policy is written in trust, the lump sum payout isn't subject to inheritance tax and doesn't form part of your estate.
It also sits outside the registered group life scheme rules, so it doesn't reduce your pension lump sum and death benefit allowance the way some employer-arranged life cover can. Your accountant can confirm the exact tax treatment for your specific company — we're always happy to compare notes with them.
Relevant life insurance vs death-in-service benefit
Both pay a tax-free lump sum on death, but they're built for different situations. Here's what actually changes.
Death-in-service benefit (group life scheme)
Employer-arranged, tied to your job
- ×Usually needs several employees to set up a group life policy
- ×Cover is often capped at a multiple of basic salary only
- ×Can count towards your pension lump sum and death benefit allowance
- ×Cover stops the day you leave the company
Relevant life insurance
Works for a single director
- ✓Works for a single company director with no other employees
- ✓Cover can be based on salary, dividends and P11D benefits combined
- ✓Sits outside the pension lump sum and death benefit allowance
- ✓Written on your individual circumstances — easier to keep or adapt
Relevant life insurance and business protection: key person insurance explained
Relevant life insurance is personal family protection, not business protection insurance — it's worth being clear on the difference. Business protection insurance covers the company itself: key person insurance protects the business if a key person dies or falls critically ill, and shareholder protection insurance funds a share purchase if a shareholder dies. Relevant life insurance can be used for business protection in the loose sense that it's arranged and paid for by the business, but the payout always goes to your family, not the company.
Many directors run a relevant life plan for personal cover alongside key person insurance for the business — the two solve different problems and aren't a substitute for each other.
Who's eligible for this employee benefit? Directors, employees and sole traders
Relevant life insurance is available to directors and employees of a limited company, including a single company director with no other staff. You need to be an employee of a company — on the payroll through PAYE — for a relevant life policy to qualify. It's designed specifically for directors and employees, and doesn't currently extend to sole traders or most partners.
Sole traders and equity partners in a partnership aren't eligible, because relevant life plans are an employee benefit and these arrangements don't have an employer-employee relationship. If that's your situation, a personal life insurance policy or a business protection policy such as key person insurance may be a better fit.
What happens if you leave the company or retire?
Because the relevant life policy is held in trust for your family rather than owned by the company, the trustees can assign it to you personally if you leave, retire, or the company closes down. Your relevant life insurance cover doesn't have to end the day your employment does, which is a real advantage over death-in-service benefit cover tied to a group life scheme.
Relevant life insurance FAQs
What's the difference between relevant life insurance and other types of life insurance?
The cover itself works the same way as any life insurance policy — a tax-free lump sum on death or terminal illness. The difference is who pays and how it's taxed: a personal life policy is funded from your taxed income; a relevant life plan is funded by your company as a business expense, with no income tax, National Insurance or inheritance tax along the way.
Is relevant life insurance a benefit in kind?
No, not when it's set up correctly. Because the premium is paid to a trust for your family rather than to you personally, it isn't reported on a P11D and doesn't create a benefit-in-kind tax charge.
Can sole traders or self-employed people get relevant life insurance?
Not directly. Relevant life policies are only available to directors and employees of a limited company paid through PAYE. Sole traders and most partners would typically look at a personal life insurance policy or, for business partners, a shareholder protection or key person insurance policy instead.
Does the payout go to my company or my family?
Your family, or whoever you name as beneficiary. The plan is written in trust from the outset specifically so the lump sum bypasses your company and your personal estate.
Does relevant life insurance cover terminal illness?
Most relevant life plans include a terminal illness benefit as standard, paying the lump sum early if you're diagnosed with a qualifying terminal illness during the term, rather than waiting until death.
Are premiums reviewable or guaranteed?
Most relevant life plans are set up on reviewable premiums, meaning the insurer can adjust the cost as the plan progresses, rather than fixing it for the whole term. Guaranteed premium options exist with some providers.
Is relevant life insurance worth it for a single-director company?
For most single-director companies, yes. You avoid the extra tax that comes with funding a policy from salary or dividends, and you don't need other employees to qualify, unlike a group life scheme. Whether it's worth it for you depends on your income, existing cover and family circumstances.
Can relevant life plans be used for business protection?
Not in the strict sense — relevant life plans are used for business protection budgets (the company pays) but the benefit is personal, not business protection insurance for the company itself. For that, look at key person insurance or shareholder protection insurance alongside your relevant life plan.
Get your relevant life insurance quotes
Tell us about your company, your income and who you want to protect. We'll come back with illustrative quotes from across the market for your relevant life insurance policy — no obligation, no pressure.
Book a 30-min call →General information about relevant life insurance, not a personal recommendation. Rates and cover levels illustrative only and subject to insurer underwriting.