Protection for your family, through your business.
The short answer
A relevant life policy is a term life insurance policy paid for by an employer, such as a limited company, for an individual director or employee. The payout goes to the person’s family through a trust. Premiums are not usually treated as a taxable benefit for the employee, which can make it more tax-efficient than a personal policy.
Who this cover may suit
- You are a director of a limited company and pay yourself through it.
- Your company is too small for a group death-in-service scheme.
- You want to protect your family without paying personally from taxed income.
- You employ key staff and want to offer life cover as a benefit.
When to consider another option
- You are a sole trader or in a partnership — relevant life is not usually available. See our self-employed guide.
- You want cover to protect the business itself — that is key person insurance, a different product.
- You want to fund a shareholder buyout — look at shareholder protection.
How it works
Tell us about you
A few simple questions about your age, health and what you want to protect.
Choose amount and term
Pick how much cover you want, its shape and how long it should last.
Review real options
See options based on your answers, with a real person to help if you want one.
How a relevant life policy works
The company applies for cover on the life of a director or employee and pays the premiums. The policy must be written in a special relevant life trust so the payout goes to the person’s family, not the business. The rules come from the Income Tax (Earnings and Pensions) Act 2003, which treats this kind of cover as an excluded benefit. [11] HMRC’s own internal manual sets out the three types of policy that qualify. [15] MoneyHelper explains how employer life cover generally works, and the underlying contract is simply a term life insurance policy underwritten in the usual way. [7]
| Relevant life | Personal policy | Group death-in-service | |
|---|---|---|---|
| Who pays | The company | You, from taxed income | The employer |
| Who it covers | One director or employee | You | Groups of employees |
| Payout goes to | Family via a trust | Estate or trust | Family via scheme trust |
| If you leave the job | Can often be transferred | Unaffected | Usually ends |
Tax points to check
Premiums are generally not treated as a benefit in kind for the employee, and are often an allowable business expense for the company, subject to HMRC’s rules and your accountant’s view. Payouts through the trust usually fall outside the person’s estate for Inheritance Tax, which is usually charged above £325,000. [4] HMRC explains how trusts are taxed. [5]
Eligibility and limits
The policy must only provide a lump sum on death (or terminal illness) during the term, must not have a cash value, and the cover amount must be reasonable relative to the person’s earnings. Insurers set their own multiples of salary and dividends. It cannot usually include critical illness cover.
| Feature | Usually included | Usually not included |
|---|---|---|
| Lump sum on death during the term | Yes | — |
| Terminal illness payment | Often, as an advance of the death benefit | — |
| Critical illness cover | — | Not normally allowed under the rules |
| Cash-in or investment value | — | Not allowed — it must be pure protection |
| Cover for company directors with only dividend income | Possible with some insurers, limits vary | — |
Is a relevant life policy worth it for a sole director with mostly dividend income?
Many one-person limited companies pay the director a modest salary and the rest as dividends. Because dividends are not earnings from employment, some insurers limit relevant life cover mainly to a multiple of salary, which can make the maximum cover lower than a director might expect. Other insurers also allow a multiple that reflects historic dividends. This varies by insurer, so a sole director should check how each one calculates the maximum before assuming relevant life will cover the full amount they want — a separate personal policy can top up any shortfall, though it would usually be paid for personally rather than by the company.
A company director protecting her family
Fictional example: Amira, 39, sole director of a limited company, salary plus dividends, a £230,000 mortgage and two children. No prices are shown because real premiums depend on underwriting.
- Policy
- Relevant life, level cover until the youngest is around 21
- Paid by
- Her limited company
- Trust
- Relevant life trust for her partner and children
- Also
- Separate personal decreasing cover for the mortgage
Her family would be protected without her paying personally from taxed income. Our cover needs guide helps size the amount.
A small employer insuring two key staff
Fictional example: a five-person marketing company run by Tobias, insuring himself and his co-founder, Naomi, both 45, each on a salary plus dividends. The company is too small for a group risk scheme, which most insurers only offer above a minimum number of employees. No prices are shown because real premiums depend on underwriting.
- Structure chosen
- Two individual relevant life policies rather than a group scheme
- Cover basis
- A multiple of salary for each, set by the insurer’s underwriting rules
- Trusts
- Each written in trust for that person’s own family
- Review point
- Revisit multiples each year as salary and dividends change
Both families would be protected, paid for by the company, without needing enough staff to qualify for a group scheme. See our self-employed guide if your structure changes.
Relevant life at a glance
What works well
- Company pays, often tax-efficiently.
- Payout goes to family through a trust.
- Can often move with you to a new employer.
What to watch
- Only for employees and directors of an employer.
- Cover is capped by earnings.
- Tax treatment should be confirmed with an accountant.
Remember that a fixed sum loses value to inflation over a long term — see ONS figures. [9] Bereavement Support Payment offers only limited state help to surviving spouses and civil partners. [10]
The FCA’s market study into pure protection found that competition generally works well, while noting many households remain underinsured. [3] Answer every application question accurately: under the Consumer Insurance (Disclosure and Representations) Act 2012 you must take reasonable care not to misrepresent. [6]
Employer death-in-service cover is valuable, but MoneyHelper notes it usually ends when you leave the job. [7] If a claim is ever disputed, the Financial Ombudsman Service handles complaints about insurers free of charge. [8]
Keep exploring
- Life insurance for the self-employed: protecting income without an employer
- How much life cover might I need?
- Writing life insurance in trust: how it works in the UK
- Term life insurance: what it is and how it works
- Term life insurance
- Self-employed and directors
- Level term life insurance
- Life insurance in trust
Frequently asked questions
What is a relevant life policy?
A relevant life policy is a form of term life insurance that an employer, such as a limited company, takes out and pays for on the life of an individual director or employee. If the insured person dies during the term, the payout goes to their family or other chosen beneficiaries through a special trust, not to the business. It works like an individual death-in-service benefit and is often used by small companies that are too small for a group scheme, or by directors who want to protect their family tax-efficiently.
Who can have a relevant life policy?
Relevant life policies are available to employees and salaried directors of an employer, most commonly a limited company. Sole traders and partners in a traditional partnership are not usually eligible, because they are not employed by a separate business. Some limited liability partnerships have specific rules. Insurers also set age limits and maximum cover amounts based on earnings, which for directors may include dividends. If you are self-employed but not a company director, a personal term life policy written in trust is usually the alternative.
Is a relevant life policy tax-efficient?
It often is. Under the rules in the Income Tax (Earnings and Pensions) Act 2003, premiums paid by the employer for a qualifying policy are not usually treated as a taxable benefit in kind for the employee. The company may be able to treat premiums as an allowable business expense, subject to HMRC’s rules. Because the payout is paid through a trust, it usually falls outside the person’s estate for Inheritance Tax. The exact position depends on your circumstances, so confirm the details with your accountant before going ahead.
What is the difference between relevant life and key person insurance?
A relevant life policy protects the family of a director or employee: the payout goes to their chosen beneficiaries through a trust. Key person insurance protects the business itself: it pays the company if an important person dies or becomes seriously ill, to help cover lost profits, recruitment or debts. Both are paid for by the company, but they serve different purposes and are taxed differently. Some businesses have both. If you want to protect your family, relevant life is usually the relevant option.
What happens to a relevant life policy if I leave the company?
Many relevant life policies can be transferred to a new employer if they agree to take over the premiums, which means you keep your original terms without new medical questions. If the new employer does not take it over, some policies can be converted into a personal policy, though the tax advantages would no longer apply. Rules vary between insurers, so check the transfer options before you buy. This portability is one advantage over group death-in-service cover, which usually ends when you leave the job.
How much cover can a relevant life policy provide?
Insurers limit the amount of cover to a multiple of the person’s total remuneration, which usually includes salary and, for directors, may include dividends and benefits. The multiple tends to be higher for younger people and lower for older ones. The aim is to keep the cover reasonable relative to what the person earns. Insurers may ask for evidence of earnings on larger policies. Our cover needs guide can help you work out what your family would actually need before you choose an amount.
Can a relevant life policy include critical illness cover?
No, not under the standard rules. A relevant life policy must be a straightforward term life insurance contract that only pays out on death, or sometimes on diagnosis of a terminal illness as an advance of the death benefit, during the term. HMRC’s rules require it to have no cash-in value and to be pure protection, which rules out adding critical illness cover to the same contract. If a director or employee also wants protection for serious illness, this is usually arranged as a separate personal critical illness policy, paid for from taxed income, rather than bundled into the company-paid relevant life plan.
Can a company have relevant life policies for several employees?
Yes, a company can take out a separate relevant life policy for each eligible director or employee it wants to cover, there is no limit on the number of individual policies arranged this way. Each policy is underwritten and priced individually, based on that person’s age, health and earnings, and each is written in its own trust for that person’s family. This differs from a group life scheme, which usually needs a minimum number of staff and is priced across the whole group. Smaller employers often use several individual relevant life policies precisely because they do not meet a group scheme’s minimum size.
Sources
- Association of British Insurers — Protection insurers pay out £7.84 billion in claims in 2025 (2026-06-29)
- MoneyHelper — What is life insurance? (2026-09-28)
- Financial Conduct Authority — MS24/1.5 Market Study into the Distribution of Pure Protection Insurance Products: Final Report (2026-09-21)
- GOV.UK — How Inheritance Tax works: thresholds, rules and allowances (2026-09-28)
- HM Revenue & Customs — Trusts and Inheritance Tax (2010-11-08)
- legislation.gov.uk — Consumer Insurance (Disclosure and Representations) Act 2012 (2012-03-08)
- MoneyHelper — Life insurance through work (2026-09-28)
- Financial Ombudsman Service — Complain about a financial business (2026-09-28)
- Office for National Statistics — Inflation and price indices (2026-09-17)
- GOV.UK — Bereavement Support Payment (2026-09-28)
- legislation.gov.uk — Income Tax (Earnings and Pensions) Act 2003 (2003-04-10)
- GOV.UK — Funeral Expenses Payment (2026-09-28)
- NHS — Cancer (2026-09-28)
- GOV.UK — Trusts and taxes (2026-09-28)
- HM Revenue & Customs — EIM15045 — Employer-financed retirement benefits schemes: relevant life policies (2026-09-28)