Business protection
Relevant life insurance
A relevant life policy is life insurance for a director or employee that the company pays for. Used correctly, it can be a much more tax-efficient way to provide family protection than a personal policy.
How it works
The company takes out and pays for the policy on the life of a director or employee. If the insured person dies (or is diagnosed with a terminal illness, depending on the policy) during the term, a lump sum is paid to their family or other beneficiaries through a trust.
The money goes to the family, not the business. That is the key difference from key person insurance.
Why directors use it
- Premiums are normally treated as an allowable business expense for corporation tax, provided they meet the "wholly and exclusively" test
- Premiums are not usually treated as a benefit in kind, so no extra income tax or National Insurance for the employee
- Payouts made through the trust do not normally count towards the pension lifetime limits
- Ideal for small companies that are too small for a group death-in-service scheme
Who can have one?
Relevant life cover is available to directors and salaried employees of a limited company. It is not available to sole traders or partners in a traditional partnership, and it cannot include a critical illness benefit.
Important information
Cover is subject to underwriting and the terms of the policy. Tax treatment depends on the individual circumstances of the business and the insured person, and may change in the future.
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Free tools
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Relevant life saving calculator
See how much a company director could save with a relevant life policy.
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Business protection gap check
Shareholder, key person and loan protection your company may need.
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Q&A
Questions & answers
Is relevant life insurance a tax-deductible expense?
Premiums are normally an allowable business expense for corporation tax, provided the local inspector accepts they are wholly and exclusively for the purposes of the trade. They are not usually treated as a benefit in kind.
Who receives the payout from a relevant life policy?
The payout goes to the insured person's family or other beneficiaries through a discretionary trust, not to the company.
Can sole traders have relevant life cover?
No. Relevant life cover is only available through a limited company or LLP for its directors and employees.
Does relevant life cover include critical illness?
No. Relevant life policies can only pay out on death, and on diagnosis of a terminal illness where the policy includes it.
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