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Summary
Directors’ Life Insurance: Tax-Efficient Cover for Company Directors
Directors’ life insurance (Relevant Life) is a tax‑efficient policy arranged through your company to provide a lump‑sum benefit to your family if you die or face terminal illness. It offers personal protection, potential Corporation Tax savings, and peace of mind. Set up in trust with our expert business insurance team and FCA‑regulated advisers who can access market leading rates.
At a glance.
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3 simple steps to getting directors’ life insurance through your company
You pick the level of cover and budget that feels right, and we handle the application, trust setup and paperwork so your family is protected while you’re employed by the business.
Step 1: Share a few details
Tell us about your company, your role, your income and who you want to protect in a quick, no obligation fact find.
Step 2: See your tax-efficient options
We compare directors’ life insurance (Relevant Life) quotes from leading UK insurers and show you clear monthly costs and potential company and personal tax advantages.
Step 3: Choose your cover and let us do the rest
You pick the level of cover and budget that feels right, and we handle the application, trust setup and paperwork so your family is protected while you’re employed by the business.
Directors’ Life Insurance (Relevant Life): Tax-Efficient Cover for UK Company Directors
Directors’ Life Insurance, often called a Relevant Life Policy, is a clever way for a limited company to provide personal life cover for a director or employee. It’s a tax-efficient form of life insurance for UK company directors, set up and paid for by the business. Instead of you paying premiums out of your taxed income, the company pays. The premiums are usually treated as a business expense and there’s no P11D benefit-in-kind with the payout designed to go tax-free to your family via a discretionary trust, if you pass away or are diagnosed with a terminal illness.
It’s not designed for Key Persons cover or shareholder buyouts, it is personal family protection funded by the company. Our Business Protection Specialist can guide you through the setup and provide live quotes in minutes.
Is there specific life insurance for company directors in the UK?
Are you a company director concerned about what would happen should you pass? Are you looking into the various types of life insurance available to you and wondering what are your best options?
Life insurance can be a tricky subject. We don’t like to dwell on the negatives, but it’s important to plan for eventualities. Let us answer some questions you may have, such as:
On this page you will learn:
- how directors’ life insurance (Relevant Life) works in the UK
- who qualifies and who doesn’t
- the tax advantages for you and your company
- how it compares to a standard personal life policy
At a glance
Who it’s for: Life insurance for PAYE company directors. It’s not suitable for sole traders or LLP partners without PAYE.
What it covers: Life cover, plus terminal illness. It does not usually include critical illness cover.
How it works: Your company pays the premiums for your directors’ life insurance. Your policy is written into a discretionary trust, so the benefits go directly to your chosen beneficiaries.
Tax position (in plain English for UK company directors):
- Premiums: Usually deductible against corporation tax if set up correctly. No P11D or benefit-in-kind charges for the person insured.
- Benefits: Paid into the trust, not taxed under EFRBS rules, and normally tax-free to your beneficiaries.
What it’s not for: It doesn’t replace Key Person Insurance, Shareholder Protection, or other business-focused policies.
Key note: Tax treatment always depends on your personal and business circumstances, and the law can change. It is very important to get advice.
Directors’ Life Insurance: FAQ's
Quick Fire Questions:
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Why do directors choose Relevant Life over personal life insurance?
Directors’ life insurance is usually more tax-efficient than paying for the same level of personal cover from your net income.
Lower Net Cost
Premiums are paid by the company, not you personally, and there’s usually no NI or benefit-in-kind charge.
Estate Planning Benefits
The payout is placed in trust, so it normally sits outside your estate and avoids inheritance tax.
Personal Protection, Not Business Cover
The money goes directly to your family, not into the company.
How is directors’ life insurance set up properly?
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Advice & scoping: We check eligibility, agree the cover amount and term, and confirm who you want to benefit, so your cover is sustainable and tax-efficient for the long term.
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Trust deed: The policy is placed into a discretionary trust from day one, so the tax advantages are secured.
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Underwriting & issue: The company is the policyholder, and the director/employee is the life insured.
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Annual review: We revisit cover as your salary, dividends, loans or family situation changes.
Common mistakes to avoid
What we need to quote quickly
- Date of birth, smoker status, and health details
- Employment status (PAYE), salary and dividends
- Desired lump sum and policy term
- Names of your beneficiaries for the trust
Smart add-ons for directors
Executive Income Protection (EIP): Paid for by the company, usually deductible, not a benefit-in-kind. It protects your income if illness or injury stops you working, and complements a Relevant Life Policy perfectly.
Key Person or Shareholder Protection: Designed to protect the business or ownership structure, not your family. These can be arranged alongside Relevant Life for a full protection package.
Key Points About Directors Life Insurance
Relevant life insurance, also known as directors’ life insurance, has several useful benefits, including:
It is paid for via the company
As mentioned above, this type of policy is taken out and paid for by the company, not the director as an individual. The policy is therefore owned by the company, bringing with it some useful tax efficiencies.
It is considered a ‘death-in-service benefit’
This means that this type of policy is an employer-provided benefit. Not only is this good news for the employee, in this case, a director, but it also can be a good way to attract talented employees to your company by offering this (not legally mandatory) benefit.
It is especially suited to smaller businesses
If your company can’t obtain group life insurance because you have too few employees, you can take out a relevant life insurance policy to cover high-earning employees. This is also useful as it doesn’t count towards their pension lifetime allowance.
Is Directors’ Life Insurance Tax Deductible?
Yes, in many cases directors’ life insurance (Relevant Life) can be treated as a tax-deductible business expense for UK limited companies, as long as the policy is set up correctly.
Tax relief can be claimed by the company on the insurance policy premiums. Relevant life insurance is an allowable business expense. As a tax-free expense it is subtracted from company profits, thus reducing your overall corporation tax payment.
As business life insurance for directors isn’t a P11D benefit in kind, it is income tax-friendly; a company director will not need to make additional National Insurance or income tax payments. The company itself will also not need to make additional employer National Insurance payments.
In the event of the insured director dying, a payment is made to his/her beneficiaries. This is a lump sum payment that is free from income tax, capital gains tax, and inheritance tax.
Things to note:
1. The policy premiums have to be paid via the company.
Because of the tax benefits mentioned above, the policy has to qualify as a tax-free business expense. The business must own and pay for the policy.
2. The policy must be written into a trust.
In order to work correctly as a tax-efficient insurance policy, the payout must go to a discretionary trust. This effectively means that the lump-sum payment bypasses the company and the deceased’s estate. The beneficiaries receive a tax-free payment.
3. The policy must not be set up for the purposes of tax avoidance.
Although highly tax-efficient, the policy has to meet HMRC requirements and can’t be created just to avoid paying tax.
Who can have a directors’ life insurance (Relevant Life) policy?
A relevant life insurance policy doesn’t just cover company directors, it can be set up by various companies and can cover other employees. It’s designed for UK based directors and employees who are on PAYE and insured while employed by the business.
Some requirements include; being a UK resident, aged between 18 and 73 (before the employee reaches their 74th birthday).
If your business has fewer than five employees you may not be able to set up group life insurance, however, relevant life insurance is perfect in this case. Small limited companies can take out relevant life insurance for director, and other employees, and get the protection they’re not eligible for under a group life insurance policy.
Contractors and consultants who provide services via a limited company are typically eligible for relevant life insurance. Directors of their own limited companies working via PAYE can often use a Relevant Life policy to cover themselves.
An employee of a charity can qualify for relevant life insurance. The policy should be written into a trust and the beneficiary should be a charity or an individual.
What does directors’ life insurance cover in the UK?
Relevant life insurance for directors also known as directors life insurance typically covers death and terminal illness.
- Death
If the ensured party dies while employed by the company then the policy pays out a tax-free lump sum to the named beneficiaries.
- Terminal illness
Terminal illness is also usually included if the insured individual is diagnosed with an illness and has been given less than a year to live.
It’s a specific type of death-in-service style benefit, designed to pay a lump sum if you die or are diagnosed with a terminal illness while employed by the company.
Who isn’t eligible for directors’ life insurance?
Relevant life insurance is designed to cover employees of a business. Some people don’t qualify for this type of life insurance and would need to set up a different type of policy for their life insurance needs. Those not eligible include:
Non-salaried directors
If you are a director of a company, but don’t draw a salary, you don’t qualify for directors life insurance.
Company shareholders
Likewise, shareholders and equity partners who are not employed by the company are ineligible.
Sole traders
Self-employed sole traders cannot have relevant life insurance as they are not employed by a company.
Non-UK residents
Ineligibility also applies to non-UK residents as well as those outside of the age requirements (under 18 / over 75 years of age)
In these cases, a standard personal life insurance policy may be more appropriate.
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Directors’ life insurance vs personal life insurance – what’s the difference?
What are the key differences between a directors life insurance policy and a standard life insurance policy?
Premiums The business takes out and owns the policy and pays the premiums. Tax status As an allowable business expense, the policy enjoys tax advantages and provides tax-efficient life cover for directors, with the payout usually paid tax-free via a trust. Suitability To be eligible for relevant life insurance you have to meet certain criteria, namely to be an employee of a business, and the business takes out and pays for the insurance policy. Premiums The policy is owned by the insured individual, who also pays the premiums. Tax status A standard life insurance policy does not benefit from the same tax advantages of a relevant life insurance and is therefore subject to normal taxation, for example for the premiums and inheritance tax. Suitability A personal life insurance policy is for individuals.Directors life insurance
Standard personal life policy
How Much Does Directors’ Life Insurance Cost?
The cost of directors’ life insurance will depend on several factors an insurer considers, such as:
Age – an older person is statistically more likely to die and this will mean higher premiums.
Health – a healthy, non-smoker, with no pre-existing health issues and a good medical history is likely to result in lower premiums than an individual with bad health and lifestyle.
Amount of cover required – the amount that the policy will pay out in the event of the employee’s death will of course affect the premium costs.
Occupation – the type of work the company does and the role of the individual can make a difference to the premiums, based on perceived risk of death to the employee.
Similar to standard life insurance, a director’s life insurance policy will be calculated on various factors.
Insurers usually set a maximum cover level as a multiple of your total earnings (salary plus regular dividends), with higher multiples allowed at younger ages. As an example: Up to age 40 = 30 x salary Up to age 50 = 20 x salary Age 50-75 = 15 x salary This will vary according to the insurer but gives you a rough idea.How Much Cover Can You Get?
Expert view: Matt Cotter on directors’ life insurance
Matt Cotter is a protection specialist who has expertise across business and personal protection structures.
5 Minute Interview.
“It is the most tax-efficient way for directors to look after their families.”
Think of it as life insurance that your company pays for on your behalf. Instead of you dipping into your own pocket, your limited company picks up the bill. If something happens to you, a lump sum goes straight to your family via a trust — normally tax-free. It’s a really smart way for directors to get personal protection through the business.
No. When it’s set up correctly as a Relevant Life Policy, it isn’t treated like a perk, so there’s no P11D form or extra tax bill to worry about. The premiums are simply a company expense — not a benefit you’re taxed on.
Yes, in most cases. Because the cover is there to protect an employee or director, the cost is usually an allowable business expense, which means it can reduce your corporation tax. Every business is different, so we’ll check that for you — but nine times out of ten, it’s tax-efficient.
It’s designed for people who are on the payroll of a limited company — so directors and employees paid via PAYE. If you’re a sole trader or part of an LLP without PAYE, it usually won’t fit. Also worth knowing: this is about looking after your family, not the company, so it doesn’t replace Key Person or Shareholder Protection.
The trust is the secret sauce. Without it, the payout could get tangled in your estate and potentially face inheritance tax. With it, the money usually goes straight to your chosen people, tax-free, and quickly. We’ll set up the discretionary trust as part of the advice process so you don’t have to stress about the paperwork.
No — Relevant Life is strictly life and terminal illness cover. If you also want protection against things like heart attacks, strokes, or cancer, we’d add Critical Illness cover or Executive Income Protection alongside it. Think of Relevant Life as the foundation, then you can build extra layers if you need them.
Key Person is all about protecting the business — making sure the company survives if a key player can’t work. Directors’ Life Insurance is personal: it’s about making sure your family is financially secure if something happens to you. Two different risks, two different policies.
When it’s set up correctly — yes, in almost every case. The money is paid into a trust, so it doesn’t form part of your taxable estate. That means your family gets the money they need, without a big tax bite.
You’ve got options. You can normally transfer the policy to your new employer, or take it on personally and keep the cover going. The way the tax works may change, but the cover itself doesn’t have to stop just because your business circumstances do.
Most directors combine Relevant Life with Executive Income Protection (so the company covers your sick pay if you can’t work), and sometimes Critical Illness too. That way you’ve covered life, illness, and income. For the business itself, you’d look separately at Key Person or Shareholder Protection.
Summary: is directors’ life insurance right for you?
If you are a UK company director and employee of a business, you have the opportunity to have a directors’ life insurance (Relevant Life) policy paid for via your limited company.
Compared to a standard personal life insurance policy, you can usually reduce the impact of income tax, National Insurance and inheritance tax on the cost and payout of your cover.
There are some disadvantages, mainly that you must be employed by the business at the time of your death. With this in mind you may want to have a personal policy in addition to the directors life insurance policy.
FAQs
No, it’s not necessary to die during the working day, or even for your death to be related to your job. The only requirement is that you are employed by the company at the time of your death.
Unfortunately no, critical illness is not usually covered by directors life insurance. There are other policies you could look into, such as directors’ income protection insurance.
No, having relevant life insurance isn’t counted towards your pension allowance and has no impact on your pension.
There are several options in this eventuality, but typically the policy can be suspended or transferred.
I have more questions
We are here to help. Contact us and our highly qualified (and friendly) team will answer all your questions about directors’ life insurance or any other queries you may have.
FAQ's Directors Life Insurance
What is Directors Life Insurance and how does it differ from Personal Life Insurance?
Directors Life Insurance premiums are considered a business expense and are tax-deductible, reducing corporation tax. The payout is usually tax-free to beneficiaries under a trust, helping avoid inheritance tax.
Who is eligible for Directors Life Insurance?
The premium for Directors Life Insurance is typically paid by the company, not the director personally. This makes it a tax-efficient option for life cover, as it reduces the corporation tax liability.
How is the benefit from Directors Life Insurance paid out?
Is Directors Life Insurance considered a benefit-in-kind?
If you leave the company, you may transfer the policy to a new employer or take it on personally. However, the tax treatment may differ once removed from the original company structure.