Relevant Life Insurance: A Guide for Directors

Relevant life insurance is a single-life death-in-service policy that a limited company takes out and pays for on behalf of an individual director or employee, with the payout going to their family. It works much like personal life cover, but the premiums are paid by the business, are usually treated as an allowable business expense, and the benefit is normally written in trust so it sits outside the employee’s estate.

For a director weighing up business protection, the appeal is the tax treatment. Because the company pays the premium, it is generally not counted as a P11D benefit-in-kind for the employee, and the premium is not paid from taxed income the way a personal policy would be. That structure can make it more cost-effective than a comparable personal plan for many company directors.

Free Price Compare arranges life cover through our protection partner LifeSearch, and we draw on published market data, HMRC guidance and ABI material to explain your options. This is information to help you compare, not a personal recommendation.

Last updated: August 2026

Written by the Free Price Compare editorial team | Reviewed August 2026

How relevant life cover differs from personal life insurance

Relevant life cover is a company-paid, single-life death-in-service policy, whereas personal life insurance is a policy you buy and pay for yourself from taxed income. The core protection is similar – a lump sum if the covered person dies within the term – but the buyer, the payer and the tax treatment are different. With relevant life cover the employer is the policyholder, the employee or director is the life assured, and the family are the beneficiaries through a trust.

The practical effect is on cost and tax. A personal policy is paid from money you have already been taxed on. A relevant life policy is paid by the business and is usually treated as a deductible trading expense, provided it meets HMRC’s ‘wholly and exclusively for the purposes of the trade’ test. For many directors of small limited companies, that makes relevant life cover more efficient than paying for equivalent personal cover out of dividends or salary.

Relevant life cover also sits within a wider family of life insurance products. If you are new to how term cover works generally, understanding the basics of a payout, a sum assured and a policy term will make the business version easier to follow.

Figures and tax treatment are indicative and depend on your circumstances and current HMRC rules.

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How do you know if you’re entitled to relevant life cover?

You can be covered by a relevant life policy if you are an employee of a UK business, and company directors who take a salary generally count as employees for this purpose. The policy has to be a genuine employer-to-employee arrangement, so it cannot usually be used by sole traders or equity partners in a partnership who are not employees. The person covered must be an employee or salaried director of the business paying the premiums.

Relevant life plans are built to fit within the rules for tax-registered life policies set out in the Income Tax (Earnings and Pensions) Act 2003 and related pensions legislation. In practice, insurers design their relevant life contracts to meet those conditions, including that cover ends by a set age (commonly age 75) and pays a lump sum rather than a pension. If you draw only dividends and take no salary, the arrangement may not qualify, so it is worth checking your position before applying.

• Salaried directors and employees of a UK limited company can usually be covered.
• Sole traders and most equity partners are not employees, so relevant life cover generally does not apply to them.
• The benefit must be paid as a lump sum and cover must cease by the qualifying age limit (commonly 75).

How much does relevant life insurance cost?

Relevant life insurance for a healthy applicant can start from a low single-figure or low double-figure monthly premium, with Risk Assured’s April 2026 examples showing around £255 a year for £1 million of level cover over 10 years at age 30. Cost rises with age, term length, cover amount and health. The same source shows the same age-30 example at around £286 a year for a 20-year term and around £408 a year for cover running to age 75.

Price scales quickly with age. Risk Assured’s April 2026 examples put a 35-year-old at around £320 a year for £1 million over 10 years, around £402 for 20 years, and around £502 to age 75. These are illustrative single-life, level-term figures for a non-smoker in good health, not a market-wide tariff, so your own quote could be higher or lower.

Figures are illustrative examples for £1 million of cover (Risk Assured, April 2026) and may change; your quote depends on your age, health, cover level and term.

The tax structure is part of the value, not just the headline premium. Because the company pays the premium as an allowable expense and it is not a P11D benefit, the effective cost to a director can be lower than an equivalent personal policy paid from dividends. If you want to compare the mechanics of term cover first, our explainer on level or decreasing term life insurance sets out how the payout behaves over the term.

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How much cover can I get?

Relevant life cover is typically offered as a multiple of the employee’s total remuneration, and insurers commonly allow higher multiples for younger applicants and lower multiples for older applicants. Remuneration for this purpose usually includes salary and dividends and, in some cases, benefits in kind, which lets directors of small companies secure substantial cover. The exact multiple an insurer will allow depends on the applicant’s age, with younger lives generally able to obtain the higher multiples.

Because it is a death-in-service benefit, relevant life cover is designed to protect the employee’s family, not the business itself. It pays a lump sum to the family through the trust if the covered person dies during the policy term, and many plans also pay out on diagnosis of a terminal illness with a life expectancy of less than 12 months. Cover amounts run into the millions for higher earners, but the sum assured has to be justified by remuneration rather than chosen freely.

Why relevant life plans are written in trust

Relevant life policies are almost always written in trust from the outset, which is what routes the payout to the employee’s chosen family beneficiaries and keeps it outside the employee’s estate for inheritance tax purposes. The trust is a core part of the structure rather than an optional extra, and most insurers provide their own relevant life trust deed to complete alongside the application. Without the trust, the arrangement would not meet the conditions for the intended tax treatment.

Writing a policy in trust has two practical benefits. First, the money can usually be paid to the family without waiting for probate, which speeds up access at a difficult time. Second, because the benefit is held in trust for the beneficiaries, it generally does not form part of the deceased’s estate, so it is not normally added to the value assessed against the inheritance tax nil-rate band of £325,000 set by HMRC. The question of a named beneficiary versus a trust matters less here because relevant life cover is designed to be held in trust by default.

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Are relevant life payouts taxable or subject to inheritance tax?

A relevant life payout is normally paid free of income tax and, because it is written in trust, usually falls outside the deceased’s estate for inheritance tax. Life insurance payouts in the UK are generally not subject to income tax in the hands of the beneficiary, and a policy held in a valid trust does not normally form part of the estate assessed against the £325,000 inheritance tax nil-rate band, according to HMRC guidance on inheritance tax. This is one of the main reasons relevant life cover is set up in trust as standard.

The position on inheritance tax depends on the trust being valid and correctly set up. A personal life policy that is not written in trust can be added to the estate and, where the total exceeds the nil-rate band (plus any residence nil-rate band of up to £175,000 that applies), the excess can be taxed at the standard inheritance tax rate. With a relevant life plan the trust is built in, which is why the benefit is generally protected from that assessment. Tax rules can change and depend on individual circumstances, so it is worth checking current HMRC rules before relying on the treatment.

Can I have relevant life cover and a personal policy?

Yes, you can hold relevant life cover and a personal life insurance policy at the same time, because they are separate contracts with separate payouts. There is no rule preventing a director from having both, and each policy pays its own sum assured on a valid claim. Some directors keep an existing personal policy running while adding company-paid relevant life cover to increase overall protection.

Holding more than one policy is common where different needs overlap. A personal policy might have been set up to cover a mortgage, while relevant life cover adds family protection paid efficiently through the business. There is no fixed limit on how many life insurance policies you can hold, though each insurer will assess total cover across policies when underwriting. If you already have a personal plan, comparing it against a relevant life option can show whether restructuring your protection would reduce the after-tax cost.

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Relevant life vs key person and shareholder protection

Relevant life cover protects an employee’s family, whereas key person and shareholder protection protect the business itself, and directors often confuse the three because all are forms of business protection. Relevant life is a death-in-service benefit paid to the family through a trust. Key person insurance pays the company a lump sum to cover the loss of a vital individual, and shareholder protection funds the purchase of a deceased shareholder’s stake so ownership stays with the surviving owners.

Choosing between them comes down to what you are protecting. If the aim is family financial security funded tax-efficiently through the company, relevant life cover fits. If the aim is to keep the business trading after losing a founder, salesperson or technical lead, key person insurance is the relevant option. If the aim is to control who owns the company after a shareholder dies, shareholder protection with a suitable cross-option agreement is the mechanism.

• Relevant life: pays the employee’s family, written in trust, tax-efficient death-in-service cover for one person.
• Key person insurance: pays the business to cover the financial impact of losing a important employee.
• Shareholder protection: funds the buy-back of a deceased shareholder’s stake to keep ownership within the business.

Because these do different jobs, a growing company sometimes uses more than one. A contractor or single-director company might only need relevant life and, later, income protection, whereas a partnership with several owners may layer shareholder and key person cover on top.

How to compare relevant life insurance

Comparing relevant life insurance means checking the cover level, the term, the definitions and the trust arrangement across insurers, not just the monthly premium. The cheapest headline price is not always the best value once you account for how remuneration multiples are calculated, whether terminal illness is included, and how straightforward the insurer’s relevant life trust is to complete. Most major UK life insurers offer relevant life plans, and cover is regulated by the Financial Conduct Authority (FCA), with claims disputes handled by the Financial Ombudsman Service.

Free Price Compare arranges life cover through our protection partner LifeSearch, who can quote relevant life alongside personal and business protection so you can see the options side by side. When you compare, look at the sum assured you can justify from your remuneration, the term that suits your plans, and whether the insurer’s trust wording meets the qualifying conditions. Reviewing your overall life insurance position alongside any existing personal cover helps you avoid paying twice for the same protection.

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Information correct as of 30 August 2026. Prices, tariffs, policy details and providers change frequently, so please check the latest details before making a decision. This article is for general information only and does not constitute financial advice. Free Price Compare is authorised and regulated by the Financial Conduct Authority (FCA).