Can you have multiple relevant life policies?

A relevant life insurance policy is normally arranged by a company to provide life cover for an employee or director. In some situations it is possible to have more than one relevant life policy covering the same person.

There is no HMRC rule limiting the number of relevant life policies an individual can have. However, insurers will normally assess the combined level of cover across all policies before approving a new application.

In practice, underwriting limits based on income, role and existing protection usually determine whether multiple policies are accepted.

That means holding more than one policy is possible, but each new policy must still satisfy both insurer underwriting requirements and the conditions needed for relevant life treatment.

Why someone might want more than one policy

There are several legitimate reasons why a company might arrange additional cover rather than replacing an existing policy.

A company may have taken out a policy years ago and now wants to add more cover rather than replace the original policy.
A director’s income may have increased, meaning the original sum assured feels too low.
One policy may have been written on older terms, with a newer one added later.
A person’s business circumstances may have changed, requiring additional protection.

In some cases it can make sense to keep an existing policy in place rather than cancel it and start again — particularly if there have been changes to the insured person’s health.

Limits on multiple relevant life policies

The key issue is not simply whether an insurer will approve a new policy, but whether the total level of life cover across all policies is reasonable.

Before approving a new policy, insurers will usually check whether other life cover is already in place. That can include:

Existing relevant life policies
Personal life insurance
Employer-provided group life cover

They then compare the combined level of protection with the individual’s income, age and role in the business.

Relevant life insurance is designed to provide death-in-service style cover for an employee or director. If the total protection appears too high relative to earnings, the insurer may reduce the amount offered or request further underwriting information.

This guide explains whether salary and dividends can be used as proof of income for underwriting purposes.

HMRC does not impose a single-policy limit

There is no specific HMRC rule restricting individuals to one relevant life policy.

The important point is that each policy must still meet the conditions required for relevant life treatment and form part of a genuine employment arrangement.

Relevant life insurance is intended to provide tax-efficient death-in-service cover for an employee or director, rather than serving as a way to extract funds from a company.

If more than one policy is in place, the overall arrangement should still make sense from both a tax and insurance perspective.

Can one company take out two relevant life policies on the same director?

A company can arrange more than one relevant life policy for the same director. This sometimes happens when an existing policy is kept in place and additional cover is added later.

Insurers will normally assess the total protection across all policies rather than looking at each policy in isolation.

If the combined cover appears high relative to the director’s income, the second policy may be limited or declined.

For directors paid mainly through a small salary and dividends, underwriting can sometimes be more complex than for a standard salaried employee.

Can different companies each take out a policy on the same person?

Separate companies can sometimes arrange relevant life cover for the same person. This situation may arise where an individual genuinely works for more than one employer.

Where connected companies or owner-managed businesses are involved, insurers will usually review the full picture before approving additional cover.

Applicants must disclose any existing policies, and the combined level of protection must still be justified by the individual’s income and employment role.

Underwriting limits still apply even if different companies arrange the policies.

Would it be better to increase one policy instead?

In many cases this is the simplest approach.

Advisers often recommend replacing an existing policy rather than layering several smaller policies over time.

A single updated policy can be easier to manage and simpler for trustees and beneficiaries to understand.

However, keeping an older policy while adding additional cover can still make sense depending on the age of the original policy, changes in health, and the cost of replacement cover.

What role do trusts play?

Relevant life policies are normally written into a discretionary trust so that the payout goes to the chosen beneficiaries rather than the company.

If multiple policies are in place, the trust arrangements should remain clear and consistent.

The trust wording does not have to be identical across policies, but documentation should be reviewed carefully. Having several policies increases the risk of administrative mistakes.

See our guide explaining how relevant life insurance trusts work.

What if you change companies later?

If you already have one or more policies and later move to a different company, or cease trading through the original one, the situation can become more complex.

You may end up with policies arranged at different times, under different sponsoring employers.

An independent financial adviser can review the policies and help decide whether they should be kept in place, adjusted or consolidated.

Find out more about what happens if you leave your company.

Get a free quote Calculator