Who can take out a relevant life policy?
A relevant life insurance policy can only be taken out by a UK business for the benefit of an employee or director. It’s a type of employer-paid life cover designed to provide a tax-efficient death-in-service style benefit for individuals working within a limited company or incorporated business. You can read HMRC’s overview of PAYE and employer responsibilities for context on the employment link required.
Eligible businesses and individuals
To qualify, there must be an employer–employee relationship. The policy is owned and paid for by the company, while the person insured is an employee or director. This means it’s suitable for:
- Limited company directors – including one-person companies
- Employees of limited companies, partnerships (if they’re on payroll), or LLPs
- Businesses that want to provide life cover for key team members as part of their remuneration
The company must pay the premiums directly, and the policy must be set up in a discretionary trust to ensure any payout goes to the employee’s chosen beneficiaries tax-free. For more on how these trusts operate, see how to set up relevant life insurance.
Who can’t take out a relevant life policy?
Because HMRC rules require an employer–employee link, sole traders and traditional partnerships cannot take out relevant life insurance. They can still arrange personal life insurance, but they won’t receive the same tax treatment or corporation tax relief.
Similarly, the policy can’t cover family members who aren’t employees or anyone not on the company payroll. If you’re self-employed and want general cover, MoneyHelper explains how standard life insurance works for individuals.
Ownership and control
The company is the policyholder and pays the premiums. The individual insured doesn’t personally own the policy, and it can’t be transferred into their name without the insurer’s agreement. If the person leaves the business, the company can cancel the policy or arrange for continuation in limited circumstances — see what happens if you leave your company.
Why eligibility matters for tax relief
For the policy to be treated as an allowable business expense, it must meet HMRC’s “wholly and exclusively” test — meaning it’s provided for legitimate business reasons (to offer an employee benefit) rather than personal cover. When set up correctly, the company can usually deduct premiums against Corporation Tax, and there’s no benefit-in-kind for the insured person.
For further details, see is relevant life a business expense? and tax benefits of relevant life insurance, or review the 12 key facts summary for a wider overview.
Speak to Broadbench to confirm eligibility and find the most suitable provider for your company’s circumstances.