Relevant life insurance

Look after your loved ones after you've gone, and give yourself peace of mind with a relevant life insurance policy.

What is relevant life insurance?

Relevant life insurance is a type of death-in-service benefit paid for by the business. Often taken out by company directors due to the numerous tax benefits, it's designed to allow smaller businesses to protect their employees instead of a group life scheme.

If the insured employee or director dies during the cover term, the policy will pay a lump sum to the deceased's family. Relevant life insurance also will payout when the insured is diagnosed with a terminal illness with a prognosis of fewer than 12 months to live.

Why you might need relevant life cover

Many businesses wish to provide their employees with a death-in-service benefit to help support their families should the worst happen. However, if you have less than five employees, you'd be unable to set up a group life policy. Additionally, relevant life cover is highly tax efficient, making it an excellent choice for directors of limited companies who want to protect themselves and their families while minimising their tax liability.

Relevant life cover is an excellent option for high-paid employees as, unlike a group policy, the plan's benefit don't count towards their lifetime pension allowance.

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How does relevant life insurance work?

Here's how a typical policy would be set and run:



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Set up a discretionary trust alongside the policy.


Pay the monthly premiums via your business.


If the insured dies, the benefit will be paid to their trust, ready to distribute to loved ones.

Benefits of relevant life cover

There are numerous benefits of relevant life insurance for employees, directors and the business.

Employee and director benefits

  • It's tax-efficient life insurance, with typically no P11D benefit in kind liability nor inheritance tax due on the benefit.
  • As the benefit is paid into a trust, it avoids probate and therefore gets to the beneficiaries faster
  • Peace of mind to employees and directors that their families will be supported should the worst happen.
  • For high-earning employees, a relevant life plan helps protect your pension. Unlike a group life scheme, it does not count toward your pension lifetime allowance.

Employer benefits

  • A great alternative to group life schemes for companies with less than five employees.
  • When you support your employees with benefits like life cover, they feel valued and are more likely to stay with your company.
  • Providing life insurance for your staff boosts your employer brand and helps attract top talent to your business.
  • It's a tax-efficient employee benefit that's typically an allowable business expense and, therefore, tax deductible.

If an employee insured through relevant life cover leaves the company, they would typically lose their cover. However, they may be able to take ownership of their policy and ask their new employer to take it on. But, if their new employer refuses, they would have to pay the premiums themselves to remain covered.

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What does relevant life insurance cover?

A relevant life plan provides life cover for employees and directors in your company. If a person covered dies or is diagnosed with a terminal illness (defined as a life expectancy of twelve months or less), your plan will pay out a lump sum.Relevant life premiums do not count towards your pension lifetime allowance.

Additional cover options

The relevant life cover market is highly competitive, so insurers offer a range of optional extras to win your custom. These may include:

  • Wellbeing support services - access to helplines to help with medical, legal and personal matters.
  • Bereavement counselling - a person insured or their families can get help to cope with their loss.
  • Financial support - some insurers offer access to a financial adviser to help make sure their relevant life cover is as tax efficient as possible.
  • Rewards - existing customers can get discounted products and gym membership rewards.


In most instances, your relevant life insurance policy will pay out quickly, with minimal stress. However, not all causes of death are covered by such plans. 

Exclusions may include:

  • Pre-existing conditions - Depending on your policy and how it is underwritten, your policy may not pay out if an employee dies from a pre-existing condition they should have disclosed at the start.
  • Suicide and self-harm - If your employee takes their own life, the insurer may not pay out the claim.
  • Self-inflicted injuries - Your policy may not pay out if the cause of death is something the employee chose to do, such as dangerous sports.
  • Alcohol or drug misuse - If the person covered dies from addiction issues, your insurer may not pay the death-in-service benefit.
  • Criminal acts - If your employee dies while committing a crime, their death is unlikely to be covered by your relevant life insurance.
Talk to our expert advisers today to find out more about what else you can offer your valued staff.

Who is eligible for relevant life insurance?

While eligibility differs depending on what insurance provider you choose, in most cases, any employee is eligible for a relevant life policy. However, there may be age restrictions and a minimum or maximum amount of cover you can purchase. For example, a policy will have to pay out or lapse before the employee reaches 75 years of age.

Sole traders, limited liability partnership members and partners can also be eligible for relevant life cover, but only with some providers.

For help with eligibility, talk to our team of expert advisers today.

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How much does relevant life cover cost?

The cost of your plan depends on several factors, including:

  • The number of people you want to cover
  • The average age of employees - Older people have a lower life expectancy, so they are more of a risk for insurers.
  • Cover level - More cover means higher premiums.
  • Occupation - If the person covered works in a risky job (e.g. construction), there might be an extra cost to insure them.
  • Individual circumstances - If medical evidence shows that your employee has pre-existing conditions or is a smoker, they are likely to be more expensive to cover with a relevant life plan.
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How much cover do I need?

Your level of cover is entirely up to you, based on what you want to offer your employees. However, insurers recommend choosing a cover amount based on each employee's salary and age. The lower their age, the higher the multiple of their salary.

For example, employees under 29 would be covered for 35x their annual salary, staff in their 30s 30x their salary and so on until employees over 60, who get covered for 15X their remuneration.During the life policy term, employers can increase the amount of cover if they wish. Some employees may require more cover if they buy a home, get married, have children or achieve a higher salary, for example.

Ensure the amount of cover you purchase, and the premiums you pay are appropriate for you and your business.

Darren couldn’t have been more helpful, explaining all the options for my policy, then finding the one that is best for me. This was all tied up efficiently and swiftly. I couldn’t be more satisfied, and will always use his services.
Sandie C

Types of relevant life insurance

The two main types of relevant life cover are level cover and inflation-linked cover.

  • Level cover - The amount of cover for the person insured remains the same throughout the term of the relevant life policy.
  • Inflation-linked cover - The amount of cover increases yearly to match the inflation level.
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Relevant life insurance and tax

The favourable tax implications of relevant life cover are one of the main reasons companies opt for this type of insurance over a group life scheme.Here are three things you need to know about relevant life insurance and tax:

  • Insured employees do not pay income tax on their death-in-service premiums as the HMRC do not classify it as a benefit in kind. This is unlike many employer-paid benefits, such as private medical insurance, where tax is chargeable.
  • For companies, relevant life premiums are an allowable expense with tax relief on paid premiums. It can mean you pay less in corporation tax. The policy is owned and paid for by the company rather than the insured employee.
  • Relevant life insurance is not liable for national insurance contributions for both the business and the employee.
  • When you set up a trust for your relevant life cover (as is recommended by most insurers), most life insurance payouts will not be liable for inheritance tax.
For more information on how relevant life insurance affects your tax situation, please speak to our friendly team.

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