doctor consultant locum relevant life insurance

Life insurance for doctors, consultants and locums using limited companies

Life insurance for doctors, consultants and locums using limited companies

Many doctors carry out work outside their main NHS role. Private practice, medico legal work, consulting, or locum engagements are often organised through a limited company.

Where this structure exists, relevant life insurance can provide a tax efficient way to arrange life cover.

A relevant life policy allows a limited company to provide life insurance for a director or employee. Premiums are normally paid by the company, and the benefit is paid to the insured person’s beneficiaries through a discretionary trust.

For doctors who operate through their own company, this structure can make life insurance significantly more tax efficient than arranging a personal policy.

This guide explains how relevant life insurance works for:

  • NHS consultants with private practice companies
  • locum doctors working through limited companies
  • private specialists and consultants
  • doctors who run clinics or medical practices
  • medical professionals earning income through salary and dividends

If you are new to the concept, you may wish to start with our core guide: what is relevant life insurance?

Table of contents

Why some doctors operate through limited companies

Many clinicians receive income from multiple sources.

Typical examples include:

  • NHS consultants who also treat private patients
  • locum doctors providing services to hospitals or clinics
  • specialist consultants carrying out medico legal or advisory work
  • practice owners running clinics or medical businesses

Private work is sometimes invoiced through a limited company rather than being received personally.

In this structure the doctor is normally both director and employee of the company, which allows the company to provide employee benefits including relevant life insurance.

A doctor who works purely as a sole trader would not normally be able to use relevant life insurance because the employer employee relationship does not exist.

Relevant life insurance for NHS consultants with private practice

Many senior doctors work primarily for the NHS but also carry out private work.

This might include:

  • private consultations
  • surgical procedures in private hospitals
  • expert witness work
  • advisory or consultancy services

In some cases these services are delivered through a limited company.

NHS consultants already receive death in service benefits through the NHS Pension Scheme, but this cover is linked to NHS employment.

However, that protection is based on pensionable NHS earnings and may not reflect additional income generated through private practice.

A relevant life policy arranged through the consultant’s company can provide additional cover based on their private practice income.

Because the policy is provided by the company, the premiums may also be eligible for favourable tax treatment.

More information on the tax position can be found here: tax benefits of relevant life insurance

Relevant life insurance for locum doctors

Locum doctors sometimes operate through their own limited companies, particularly when undertaking private sector work.

Historically many locums used personal service companies to invoice hospitals or agencies.

Although NHS and agency rules have changed in recent years, some locums still operate companies for private practice or specialist consulting work.

Where a locum doctor has a limited company and receives income through it, the company may be able to provide relevant life insurance.

The key requirement is that the doctor is both:

  • an employee of the company
  • a director or shareholder

In this situation the company can pay the insurance premiums directly.

Doctors running private clinics or specialist services

Some doctors operate full medical businesses through limited companies.

Examples include:

  • aesthetic clinics
  • dermatology practices
  • diagnostic services
  • specialist consulting businesses

In these cases the company is effectively the doctor’s main trading vehicle.

Relevant life insurance can be a useful protection tool for these businesses because it allows the company to provide life cover for the key individual whose work generates income.

This approach is commonly used by owner-managed companies across many professional sectors.

How insurers assess income for doctors

Doctors working through limited companies often receive income in several forms.

These can include:

  • director salary
  • dividends
  • retained company profits
  • private consultation fees

Insurers typically consider total remuneration when assessing the maximum level of cover available.

This means that both salary and dividends may be taken into account.

You can read more about this here: can salary and dividends be used as proof of income?

For high earning professionals such as doctors, insurers may allow relatively high multiples of remuneration, subject to underwriting and financial evidence.

Example scenario for a consultant doctor

Consider a consultant surgeon with the following income structure.

Income source Annual income
NHS employment £110,000
Private practice via limited company £140,000

The private practice income is paid to the doctor’s limited company.

The doctor pays themselves:

  • a small director salary
  • the remainder as dividends

If the doctor arranges life insurance personally, premiums must be paid from post tax income.

With a relevant life policy, the company pays the premiums, which may allow the cost to be treated as a business expense depending on the circumstances.

More information is available here: is relevant life insurance a business expense?

Tax treatment of relevant life insurance

Relevant life insurance is designed to be tax efficient when structured correctly.

Typical features include:

  • premiums paid by the limited company
  • no benefit in kind charge in most cases
  • no employer or employee National Insurance on the premiums
  • payouts normally made free of income tax

Because the policy must be written into trust, the payout is also usually outside the insured person’s estate for inheritance tax purposes.

You can read more here: relevant life insurance and inheritance tax

The detailed rules governing these policies are set out by HMRC under the legislation for excepted group life policies.

Further information can be found in HMRC guidance: HMRC Employment Income Manual

When relevant life insurance may not be suitable

Although relevant life insurance can be attractive for doctors working through companies, it is not suitable in every situation.

For example, it may not be appropriate where:

  • the doctor operates purely as a sole trader
  • there is no limited company structure
  • the objective is to insure the business itself rather than the individual

In those cases, other forms of protection such as key person insurance or personal life cover may be more suitable.

You can also compare policies here: relevant life vs personal life insurance

How to arrange relevant life cover as a doctor

Doctors with complex income structures should normally take professional advice before arranging relevant life insurance.

An adviser will usually consider:

  • company structure
  • income sources
  • desired level of cover
  • trust arrangements for beneficiaries

This ensures the policy meets HMRC rules and is structured correctly.

If you want to explore potential premiums, you can use our calculator here: relevant life insurance calculator

Alternatively you can request advice here: get a relevant life insurance quote