How Can Relevant Life Insurance Help You Save?

By Olivia Johnson - Trusted UK Business Expert

Last Updated 29th of November 2025

4 minute read

Saving money while protecting your loved ones and employees is not just smart—it’s possible. Relevant Life Insurance is a powerful tool that helps business owners and directors do just that. If you’re looking for ways to cut costs and still get great cover, you’re in the right place.

Relevant Life Insurance helps you save by allowing employers to provide tax-efficient life cover to employees, including directors. Premiums are paid through the business, avoiding personal tax charges, Income Tax, and National Insurance—leading to big savings for both sides.

There’s more to this smart life cover than meets the eye. If you’re a small business owner or director, you’ll want to understand how this policy helps you and your business keep more money in your pocket.

Make smarter financial decisions for your business. Click below to explore how Relevant Life Insurance delivers real savings and protection.

How Can Relevant Life Insurance Help You Save?

Relevant Life Insurance is a tax-efficient life cover set up and paid for by a business. It offers a death-in-service benefit for an individual—usually a company director or employee—while delivering serious savings compared to personal life insurance.

This kind of policy is designed especially for small businesses that might not have enough staff to get a group life insurance scheme. Instead of paying out of personal income for a standard life insurance policy, the employer pays the premium on the employee’s behalf. Best of all, these premiums are considered a business expense, making them tax-deductible.

Let’s explore how Relevant Life Insurance works and how it helps you save both money and tax.

The Main Ways Relevant Life Insurance Saves You Money

No Income Tax on Premiums

When you pay for personal life insurance, you do it with money that’s already been taxed. But with Relevant Life Insurance, the business pays. That means you don’t pay Income Tax or National Insurance on the premiums.

Example:
If you’re a higher-rate taxpayer paying £100 a month for personal life cover, you need to earn about £180 before tax. With Relevant Life Insurance, your company pays the £100 straight out, saving you 45% or more.

Corporation Tax Relief

Since the premiums count as a business expense, your company may claim Corporation Tax relief. That means less tax paid by the company, which adds up over time.

No National Insurance Costs

For employers, providing a benefit like salary or a bonus comes with a National Insurance cost. But not with Relevant Life Insurance. There are no employer or employee National Insurance contributions on the premiums—another source of savings.

No Benefit-in-Kind Tax for Employees

Relevant Life Insurance is not treated as a benefit-in-kind. That means the employee doesn’t pay any additional tax on the premiums either. It’s one of the few business-paid benefits that comes completely tax-free to the individual.

Benefits Paid Free from Inheritance Tax

The payout goes into a special trust, meaning it doesn’t form part of the deceased’s estate. This keeps the sum insured outside of Inheritance Tax, ensuring the full amount reaches the family quickly.

Who Should Consider Relevant Life Insurance?

Relevant Life Insurance is ideal for:

• Company directors wanting life cover in a tax-efficient way
• Small business owners with only a few staff
• High earners affected by the pensions Lifetime Allowance
• Employees who don’t have access to a group life scheme

How It Works: Step by Step

1. The company takes out a Relevant Life policy on the life of the employee or director.
2. The company pays the monthly or yearly premium.
3. A trust is set up to hold the policy—ensuring the benefit is paid tax-free.
4. If the insured person dies (or is diagnosed with a terminal illness, if covered), the trust pays out to the family or chosen beneficiaries.

It’s that simple.

What Makes It Better Than Personal Cover?

Relevant Life Insurance is all about savings and smart tax use. Here’s how it compares:

Can You Add More Cover Later?

Yes, many providers offer what’s called a “Guaranteed Insurability Option.” This lets you increase cover without new medical checks when key events happen—like a promotion or marriage. It makes the policy flexible for life’s big changes.

Is Relevant Life Insurance Regulated?

Yes. Relevant Life Insurance must meet HMRC’s strict criteria to qualify for the tax benefits. It should be a non-pension policy, paid for by an employer, and cover only death-in-service (or terminal illness in some cases). Always work with a regulated adviser or broker.

What Does It Cost?

The cost of Relevant Life Insurance depends on:

• Age
• Health
• Amount of cover
• Term length

It’s often cheaper than personal cover after tax savings. For example, a healthy 40-year-old could get £500,000 cover for around £30–£50 per month paid by the company. After Corporation Tax relief, the real cost could be even less.

5 Smart Tax Benefits at a Glance

1. No Income Tax on premiums
2. No National Insurance for employer or employee
3. Corporation Tax deductible
4. No Benefit-in-Kind for the employee
5. No Inheritance Tax on the payout (if in trust)

How to Set One Up Today

Setting up a Relevant Life Insurance policy is easy:

1. Speak with a broker who understands Relevant Life plans.
2. Get quotes from top UK insurers.
3. Put the policy in trust—your broker should help with this.
4. Review your policy each year as your situation changes.

Expert Quote

“Relevant Life Insurance is one of the most tax-efficient ways for directors and small business owners to protect their families—while keeping more of their hard-earned money.”
— Richard Hale, FCA-Approved Financial Adviser

Ready to save money and protect your loved ones? Click the link below to compare top Relevant Life Insurance policies and speak to a qualified expert.

FAQ

Is Relevant Life Insurance only for directors?

No. It can cover any employee of a company. However, sole traders and partnerships are not eligible.

Can I use this if I’m a contractor?

Yes, if you’re operating under a limited company, you can use Relevant Life Insurance.

Is it just for death cover?

Some policies may include terminal illness cover, but it does not cover sickness or critical illness unless specified.

What happens if I leave the company?

The policy will end unless transferred or a new arrangement is made by your next employer.

Can my family use the payout for anything?

Yes. The payout is given to the trust and then passed to your chosen beneficiaries. It can be used for any purpose.

This guide shows exactly how Relevant Life Insurance helps you save. With tax benefits for both employer and employee, it’s one of the smartest moves a small business can make.

Let’s help you do just that—compare policies and start saving today.