How portable is relevant life cover when you change companies?
Relevant life insurance is a tax-efficient way to provide employees with death-in-service protection if you run your own limited company. It covers employees, including directors.
As the policies are owned and paid for by the limited company, what happens if you leave (or close down) the company and move to a new employer?
Whether you’re leaving for a new job, retiring, selling the company, or closing it, here is a clear breakdown of your options for changing your current relevant life cover.
The policy is linked to your employment with the company
Relevant life policies are structured around the employer-employee (or director-company) relationship.
The company pays the premiums as a deductible business expense, and the cover is designed to meet HMRC’s rules for exempted group life policies (see our guide on HMRC rules for exempted group life policies).
When the relationship ends through resignation, redundancy, retirement, company closure, or the business going dormant, the existing policy can no longer operate as it has.
In most cases, the cover will automatically end unless you have arranged to transfer or continue paying for the policy.
If you change employers and have personal life insurance, you don’t need to do anything.
Option 1: Cancel the policy (usually no penalty)
The simplest option if you no longer want to keep the policy is to cancel it.
The company simply notifies the insurer, premiums stop immediately, and there’s usually no surrender value or cancellation fee. Relevant life plans are pure protection policies with no cash-in value.
Although this provides a clean break, it also means you no longer have any protection in place.
If your health has changed since the policy began, you could end up paying more if you take out a new policy, with new medical underwriting.
Option 2: Convert to a personal policy
Many leading insurers include a continuation option or conversion benefit.
This means you can take over the policy personally when you leave the company, transferring premium payments from the business to you.
Key points to be aware of:
- No need for fresh medical underwriting: In most cases, you can keep the same terms, sum assured, and premium amount, but you won’t benefit from the corporation tax savings anymore.
- Time limit: You typically need to make the switch within 30–90 days of leaving your employer. Check your policy or ask your broker if you are unsure of the exact terms.
- Trust changes: The policy remains written in trust, but the trustees may need to assign it to you personally or update the beneficiaries. The company (as the original trustee) may need to make an irrevocable appointment or execute a deed of assignment.
- Potential benefit changes: You may not be able to convert certain features, such as terminal illness acceleration, to the personal version. If this happens, the policy will become a standard individual life plan, and you will lose any relevant life tax advantages.
This option provides seamless continuity without re-underwriting, which is especially valuable if you’ve developed health issues since you set up the original policy via your company.
Option 3: Transfer policy to a new company/employer
If you’re moving to another limited company (as an employee or director), the new employer may be able to take over the existing policy. This means the plan remains a relevant life rather than a personal policy.
Here are the steps involved:
- The new company becomes the policy owner and payer.
- The trustees assign the policy to the new employer.
- The premium amounts remain unchanged (subject to insurer approval).
You need to check in advance, as not all insurers allow you to transfer to a new employer.
What if you close the company (or make it dormant)?
If your limited company is wound up, sold, or left dormant, the policy can’t stay funded by a non-trading entity. Cover would normally cease unless you use continuation/conversion (Option 2) or find a new employer to take it on.
Many directors in this situation convert to personal cover to avoid losing protection entirely. Plan ahead—discuss with your broker before final closure, as timing affects trust deeds and any HMRC reporting.
Practical steps to take
- Review your policy schedule and trust deed for specific continuation terms.
- Contact your insurance broker or adviser immediately. They can liaise with the insurer and handle paperwork (e.g., continuation forms from the insurer or assignment deeds).
- Consider your broader needs: If you’re moving to PAYE employment, check for group life or death-in-service benefits from the new employer. You might also explore personal critical illness or income protection (see can you include critical illness cover?).
- Think about any tax changes: Premiums paid personally lose corporation tax relief, but the payout remains tax-free to beneficiaries via the trust.
Relevant life isn’t one-size-fits-all when circumstances change, but the built-in flexibility from most providers means you rarely have to start from scratch.
Seeking professional advice early helps avoid surprises and ensures your family remains protected.