How to Choose a Director’s Life Insurance Policy

By Olivia Johnson - Trusted UK Business Expert

Last Updated 2nd of November 2025

5 minute read

Choosing the right life insurance as a company director is important. It protects your loved ones and your business. We understand the options can feel confusing — that’s why we’re here to guide you step by step.

To choose a director’s life insurance policy, decide if it’s personal or business cover, compare policy types (term or whole life), check tax advantages like relevant life insurance, review cover amount and terms, and seek advice from an expert broker.

There’s more to know than just picking a name. Let us show you how each choice affects your business, your taxes, and your family’s future. Keep reading to learn how to get it right.

Get the Right Coverage Today – Click the button below to find out more about a Director’s Life Insurance Policy.

What Is a Director’s Life Insurance Policy?

A director’s life insurance policy is a special type of cover. It is designed to help company directors protect their families and their businesses. You pay monthly or yearly for the policy. If the director dies, the policy pays out a set amount.

You can take this policy as a personal plan or through your company. Some plans are tax-efficient, meaning they can help you save money while staying protected. One popular option is a “Relevant Life Policy” — it’s like a personal policy but paid for by your business.

Choosing the right one depends on what you want to protect. Do you want to help your family? Do you want to make sure your business stays strong after you’re gone? We’ll help you decide below.

Step-by-Step: How to Choose a Director’s Life Insurance Policy

Let’s look at each step clearly. This will help you feel confident with your choice.

Decide the Type of Cover You Need

There are two main reasons for getting life insurance as a director:

• To protect your family’s future
• To protect your business’s future

If you want to make sure your family is looked after, a personal life insurance policy is a great idea. You can also take a Relevant Life Insurance policy through your company. This lets your business pay for the policy and could save you tax.

If you want to protect your business, you may also look at Key Person Insurance or Shareholder Protection. These are more business-focused but very useful for directors.

Choose the Right Type of Policy

You’ll mainly pick from two types:

• Term Life Insurance – Covers you for a set number of years (e.g. until you retire).
• Whole of Life Insurance – Covers you for your entire life and pays out whenever you die.

Term policies are cheaper. Whole of life is more costly but offers lifelong peace of mind.

Work Out How Much Cover You Need

Think about how much money your family or business would need if you die.

For family protection, this could include:

• Mortgage repayments
• Daily living costs
• Children’s education
• Funeral costs

For business cover, this could mean:

• Paying off company debts
• Keeping the business running
• Buying out your shares

Use an online calculator or ask a financial adviser to help work this out.

Think About How Long You Need Cover For

If you’re choosing a term life policy, you need to decide how long it should last.
Ask yourself:

• When will your mortgage be paid off?
• When will your children be financially independent?
• When do you plan to retire?

If the policy ends before you die, there will be no payout — so choose the length carefully.

Check If It’s Tax-Efficient

This is one of the most important steps in how to choose a director’s life insurance policy. If you’re a director of a limited company, you may be able to:

• Take out a Relevant Life Policy
• Have your company pay for it
• Avoid National Insurance and income tax on the premiums
• Keep the payout tax-free

This can be a win-win. Always speak to a tax adviser or financial adviser to check if this is right for you.

Choose a Trusted Provider or Broker

You don’t have to figure everything out on your own. Many brokers specialise in helping directors.

They can:

• Compare multiple policies for you
• Explain complex tax rules
• Save you time and money

Make sure the broker is FCA-regulated and experienced with directors’ insurance.

Key Features of Director’s Life Insurance (At a Glance)

Is a Relevant Life Policy the Best Option for You?

A Relevant Life Policy is often the smartest choice for directors. It allows your company to pay for your cover while saving on tax. Here’s why many directors like it:

“It keeps my family safe and saves the business money. That’s why I went with a Relevant Life Policy.” – James T., Managing Director, Leeds

But it’s not for everyone. If you need extra business protection (like key person cover), a different policy may be better.

How Much Does It Cost?

The cost of a director’s life insurance policy depends on:

• Your age and health
• The amount of cover
• The length of cover
• The type of policy (term or whole life)
• Whether it’s personal or company-paid

A healthy 40-year-old director could pay around £25/month for a term policy with £250,000 cover over 25 years. A Relevant Life Policy could be more, but remember — it’s tax-efficient!

Can You Get Cover If You Have Health Problems?

Yes, you can still get life cover if you have health conditions. Some insurers specialise in covering people with:

• Diabetes
• High blood pressure
• Mental health concerns
• Past serious illnesses

You may need to pay a little more, but you won’t be turned away. A broker can help find the right insurer.

What Happens If You Leave the Company?

Good news: With a Relevant Life Policy, many insurers let you transfer the policy into your own name. This means you won’t lose your cover just because you leave the business.

Always check the policy terms before you buy to be sure.

Can the Business Use the Payout?

If your business takes out a Key Person Insurance or Shareholder Protection, then yes — the money goes to the business.

But if you take a Relevant Life Policy, the payout goes to your chosen beneficiaries (like your family), not the company.

How to Get Started

Here’s a quick action plan:

• Decide your main goal (family or business cover)
• Work out how much cover you need
• Choose term or whole life insurance
• Look into tax-efficient options like Relevant Life
• Speak to a trusted adviser or broker

Want help choosing the right policy? Click the link below to compare director’s life insurance quotes and get expert advice today.

FAQ

What’s the difference between a director’s life insurance and regular life insurance?

Director’s life insurance often includes tax benefits and is paid by the business. It can protect both personal and business needs.

Can a director’s life insurance be a business expense?

Yes, if it’s a Relevant Life Policy. It’s treated as a business expense and may qualify for corporation tax relief.

Who gets the payout?

It depends on the policy. A Relevant Life Policy pays out to the director’s family. Key Person Insurance pays out to the business.

Is a medical exam needed?

Sometimes. For larger amounts or if you have health conditions, a short medical check may be requested.

Can I cancel or change the policy later?

Yes, most policies are flexible. You can cancel or adjust cover as your needs change.

If you’re wondering how to choose a director’s life insurance policy, now you have the answers. Whether you want to protect your loved ones, your business, or both — taking the right steps now can give peace of mind later.