What is relevant life insurance?
Relevant life insurance is a death-in-service life insurance policy set up and paid for by an employer (typically a limited company) for the benefit of an employee (often a director). It is one of the most tax-efficient ways for company directors and business owners to arrange personal life insurance.
How does relevant life insurance work?
The employer takes out a relevant life policy on the employee's life. The premiums are paid by the company and are treated as a business expense, making them corporation tax deductible. The payout goes to a discretionary trust for the benefit of the employee's family — tax-free.
Tax advantages of relevant life insurance
- Corporation tax relief: Premiums are a tax-deductible business expense
- No National Insurance: Premiums are not subject to employer or employee NI contributions
- No income tax: Premiums are not treated as a P11D benefit in most cases
- Tax-free payout: The death benefit is paid into a discretionary trust and is tax-free for beneficiaries
Who qualifies for relevant life insurance?
Relevant life insurance is available to UK limited company directors and their employees. It is not available to sole traders or partners (though Keyman insurance and other arrangements may be suitable). There must be an employment relationship between the business and the insured person.
How much relevant life cover can a company provide?
There is no fixed cap, but HMRC requires the benefit to be reasonable relative to the employee's salary and role. Most policies are structured at 15–25 times the employee's salary.
Relevant life vs executive income protection
Relevant life covers death only. Executive income protection (EIP) provides income replacement if the director or employee cannot work due to illness. Many directors arrange both — relevant life for death and EIP for incapacity — both funded through the company for tax efficiency.
Frequently Asked Questions
Yes — relevant life insurance is particularly popular with limited company directors, who can use company funds to pay premiums tax-efficiently rather than drawing personal income to pay for life insurance.
They serve a similar purpose but are structured differently. Death in service is a group scheme benefit. Relevant life is an individual policy set up by the company — offering more flexibility and portability.
Yes — premiums paid by a company on a relevant life policy are treated as a business expense and are corporation tax deductible, subject to HMRC conditions.