Relevant life insurance is designed for employees and directors whose life cover is arranged and paid for by their employer.
Use the checker below for a quick indication of whether relevant life insurance could be suitable for you.
Relevant life insurance is most commonly used by directors and employees of limited companies.
Sole traders cannot normally take out relevant life cover for themselves because there is no separate employer providing the benefit.
Partnerships and LLPs can be more complicated, depending on the individual’s employment status and how the business is structured.
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Could you be eligible for relevant life insurance?
Answer five quick questions for an initial indication.
This is only an initial indication. Eligibility and tax treatment depend on your circumstances and the policy meeting the relevant conditions.
Get a relevant life insurance quote →Who can take out relevant life insurance?
A relevant life policy is normally arranged by a business for an employee or director. The business pays the premiums and the employee or director is the person insured.
It is commonly used by:
- limited company directors, including directors of one-person companies;
- employees of limited companies; and
- businesses that want to provide individual life cover as an employee benefit.
HMRC treats relevant life cover as a form of employer-provided life insurance. The policy must meet a number of conditions covering matters such as the age at which benefits can be paid, who can receive them and the type of benefits provided. HMRC sets out the main conditions in its Employment Income Manual.
For a broader explanation of the rules, see our guide to the HMRC rules on relevant life insurance.
Can a limited company director take out relevant life insurance?
Yes. Limited company directors are among the most common users of relevant life insurance.
The company arranges and pays for the policy as part of the director’s remuneration package. This can include a company with only one director and employee.
The same principle can apply where two spouses are both genuine directors or employees of the business. We explain that in more detail in our guide to relevant life insurance for husband-and-wife directors.
Can employees have relevant life insurance?
Yes. Relevant life insurance is not restricted to directors.
A company can arrange cover for an employee as part of their benefits package, provided the policy and arrangement meet the relevant conditions.
This can be useful where a business does not have a conventional group death-in-service scheme, or where it wants to provide additional individual cover for a particular employee.
Relevant life cover serves a similar purpose to death-in-service insurance, although the structure and tax treatment are different. See our comparison of relevant life insurance and death in service.
Can sole traders take out relevant life insurance?
No, not for themselves.
A relevant life policy is employer-provided cover. A sole trader and their business are not separate legal persons, so there is no separate employer providing the life insurance benefit.
A sole trader can still take out ordinary personal life insurance. MoneyHelper has a useful overview of how personal life insurance works.
If a sole trader employs other people, however, the business may potentially arrange relevant life cover for an eligible employee.
What about partnerships and LLPs?
Partnerships and LLPs need more care.
A traditional partner is usually self-employed rather than an employee of the partnership, so relevant life insurance will not normally work in the same straightforward way as it does for an employee of a limited company.
LLPs can be more complicated because the tax and employment status of individual members can differ. An LLP member should confirm their position with the insurer or adviser before assuming they qualify.
Employees of a partnership or LLP may still be able to qualify where there is a genuine employer-employee relationship.
Who can receive the payout?
Relevant life insurance is intended to provide benefits for individuals rather than to insure the financial interests of the employer.
HMRC’s conditions restrict the permitted beneficiaries to individuals and charities. In practice, the policy is normally written into a relevant life trust, with the benefit intended for the insured person’s family or other chosen beneficiaries.
If the intention is for the company itself to receive the payout, key person insurance may be more appropriate.
Is there an age limit?
Yes. One of the statutory conditions is that the policy provides a benefit on death before a specified age that cannot exceed 75.
That does not mean every insurer will offer cover up to age 75. Providers can apply their own maximum entry ages and maximum policy terms.
See our guide to the age limits for relevant life insurance for more detail.
Who owns and pays for the policy?
The employer normally owns the policy and pays the premiums directly to the insurer.
The employee or director is the life insured, but they do not normally pay the premiums personally.
If the insured person leaves the business, what happens next depends on the policy and provider. The cover may be cancelled, transferred or continued under different arrangements.
See what happens to relevant life insurance if you change companies.
Does eligibility mean the premiums are automatically tax deductible?
No. These are related but separate questions.
A policy can meet the relevant life insurance conditions, but the company must still satisfy the normal rules for claiming Corporation Tax relief on the premiums.
The main test is whether the cost is incurred wholly and exclusively for the purposes of the trade. In practice, that normally means the cover should form part of a genuine remuneration package rather than simply being a personal expense routed through the company.
Our guide to the wholly and exclusively rule explains how this applies to relevant life premiums.
What if I am not eligible?
If relevant life insurance is not suitable, you may still have other options.
Personal life insurance is the obvious alternative for sole traders and other people who do not have the required employer arrangement.
If the aim is to protect the business rather than an individual’s family, key person insurance or another form of business protection may be more appropriate.
Get a relevant life insurance quote
If the checker indicates that you may be eligible, you can request a quote based on your age, health, occupation and the amount of cover required.