What Is Employee Relevant Life Insurance in the UK?

By Olivia Johnson - Trusted UK Business Expert

Last Updated 1st of June 2026

5 minute read

Employee Relevant Life Insurance in the UK is a simple way for a business to protect its staff. It is a type of life cover paid for by the company. If an employee passes away or becomes very ill, the policy pays money to their family.

This cover is set up by the employer. The business pays the monthly cost. The employee gets the benefit.

It is popular with small and medium businesses. It helps companies look after their team without high costs.

Discover how Employee Relevant Life Insurance works and why it matters. Click the link below to compare options, understand the benefits, and find the right cover for your team today.

How Does Employee Relevant Life Insurance Work?

Employee Relevant Life Insurance is easy to understand.

Here is how it works:

  • The employer sets up the policy
  • The business pays the premiums
  • The cover is in the employee’s name
  • A trust is used to hold the policy
  • If the employee dies, money is paid to their family

The money does not go to the company. It goes straight to the employee’s loved ones.

This makes it a caring and simple benefit.

Employee Relevant Life Insurance

Why Do UK Businesses Offer Relevant Life Insurance?

Many UK businesses offer this cover to support their staff.

Here are the main reasons:

  • To Support Employees’ Families: If something bad happens, the payout helps families pay bills, rent, or a mortgage.
  • To Attract New Staff: Good benefits help businesses stand out. Life insurance is a strong perk.
  • To Keep Employees Happy: Staff feel safer when they know their family is protected.
  • To Save Money on Tax: Relevant life insurance can be tax efficient for businesses, just like tax-efficient life insurance for directors.

Who Can Get Employee Relevant Life Insurance?

Not all employees will qualify, but many do.

It is often used for:

  • Full-time employees
  • Directors of limited companies
  • Key employees
  • High-value staff

It is not usually for:

  • Self-employed people with no company
  • Large groups (group life insurance may be better)

Each insurer may have its own rules.

Many businesses also use relevant life insurance for SMEs to protect small teams.

What Does the Policy Cover?

Employee Relevant Life Insurance usually covers:

Death

If the employee dies, the policy pays a lump sum.

Terminal Illness

If the employee is diagnosed with a serious illness, it may pay early.

The payout can be used for:

  • Mortgage payments
  • Living costs
  • Children’s care
  • Debt repayment

Some companies also add key person critical illness insurance for extra protection.

How Much Cover Can You Get?

The amount of cover depends on the employee’s salary.

Many policies offer:

  • Up to 20–25 times salary (depending on age)

For example:

  • If an employee earns £40,000
  • They could get up to £1,000,000 cover

This gives strong financial support for families.

The cost of cover can vary, as explained in key person insurance cost in the UK.

Employee Relevant Life Insurance

Is Relevant Life Insurance Tax Efficient?

Yes, this is one of the biggest benefits.

For the Business:

  • Premiums may count as a business expense
  • Can reduce corporation tax

For the Employee:

  • Not usually a benefit in kind
  • No income tax on premiums
  • Payout is often tax-free

This makes it better than many other benefits.

Does It Count as a Benefit in Kind?

In most cases, no.

Employee Relevant Life Insurance is usually:

  • Not taxed as a benefit in kind
  • Not subject to National Insurance

This means employees get the full benefit without extra tax.

Relevant Life Insurance vs Group Life Insurance

Both options offer life cover, but they are different.

Relevant Life Insurance:

  • For individuals
  • Good for small businesses
  • Flexible and personal

Group Life Insurance:

  • Covers many employees
  • Used by large companies
  • Less flexible

Small businesses often choose relevant life insurance because it is easier to manage.

Can Small Businesses Use Relevant Life Insurance?

Yes, and this is where it works best.

Small UK businesses often use it because:

  • It is low cost
  • Easy to set up
  • Helps compete with big firms
  • Offers strong staff benefits

Even a company with one employee can use it.

If you are unsure, read does my company need key person insurance to help you decide.

Employee Relevant Life Insurance

How to Set Up Employee Relevant Life Insurance

Setting up the policy is simple.

  • Step 1: Choose a Provider: Look for a trusted UK insurer.
  • Step 2: Decide Cover Amount: Base this on salary and needs.
  • Step 3: Set Up a Trust: This ensures the payout goes to the right people.
  • Step 4: Start Payments: The business pays monthly premiums.
  • Step 5: Review Regularly: Check cover as salaries or roles change.

You can compare options using compare keyman insurance policies.

How Much Does Employee Relevant Life Insurance Cost?

The cost depends on:

  • Age of the employee
  • Health
  • Salary
  • Cover amount
  • Policy length

Younger and healthy employees usually cost less.

Example:

  • A healthy 35-year-old may pay a small monthly fee for high cover

It is often cheaper than personal life insurance.

What Are the Key Benefits?

Here are the main benefits for UK businesses:

  • Tax Savings: Businesses can reduce tax costs.
  • Employee Protection: Families get financial support.
  • Low Cost: Affordable for small businesses.
  • Easy Setup: Simple and quick to arrange.
  • Flexible Cover: Policies can be tailored to each employee.

Are There Any Downsides?

There are a few things to consider:

  • Only for employees (not sole traders)
  • Cover ends if the employee leaves
  • Needs a trust setup
  • May not suit large teams

But for many SMEs, the benefits outweigh the downsides.

Employee Relevant Life Insurance

When Should a Business Choose Relevant Life Insurance?

It is a good choice if:

  • You run a small business
  • You want tax-efficient benefits
  • You want to protect key staff
  • You cannot afford group cover

It is also useful for directors who want personal cover paid by the company.

Relevant Life Insurance for Directors and Employees

Directors often use relevant life insurance too.

Why?

  • Paid by the company
  • Tax efficient
  • High cover available

It works well for both directors and employees in the same business.

How Is the Payout Made?

The payout is made through a trust.

This means:

  • Money goes directly to beneficiaries
  • It avoids delays
  • It may avoid inheritance tax

This makes the process faster and simpler for families.

Is It Better Than Personal Life Insurance?

It depends on your situation.

Relevant Life Insurance:

  • Paid by the business
  • Tax efficient
  • Good for employees

Personal Life Insurance:

  • Paid by the individual
  • More flexible if you leave a job

Many people use both for full protection.

Employee Relevant Life Insurance

Key Things to Check Before Buying

Before setting up a policy, check:

  • The level of cover
  • Policy length
  • Exclusions
  • Trust setup
  • Provider reputation

Always compare options to get the best deal.

Final Thoughts

Employee Relevant Life Insurance in the UK is a smart choice for many businesses.

It is:

  • Simple
  • Affordable
  • Tax efficient
  • Valuable for employees

It helps protect families and gives peace of mind.

For small and growing businesses, it is one of the best ways to offer real support to staff.

FAQ

What Is Employee Relevant Life Insurance in the UK?

It is a life insurance policy paid for by a business to protect an employee’s family.

Is It Tax Free?

In most cases, yes. Premiums and payouts are usually tax efficient.

Can Small Businesses Use It?

Yes, it is ideal for small UK businesses.

Who Gets the Money?

The employee’s chosen beneficiaries receive the payout.

Is It Worth It?

For many businesses, yes. It offers strong protection at a low cost.

Ready to choose the best Employee Relevant Life Insurance? Click the button below now to explore tailored policies, save on tax, and protect your employees with confidence.