Why Choose Relevant Life Insurance for SMEs?

By Olivia Johnson - Trusted UK Business Expert

Last Updated 2nd of November 2025

5 minute read

Are you an SME owner wanting to protect your team in a tax-efficient way? We can help you understand how Relevant Life Insurance works and why it’s a smart move for your business. It’s simple, flexible and built just for smaller companies like yours.

Relevant Life Insurance is a tax-efficient life cover policy paid by the business to protect employees or directors. It gives a lump sum to a nominated person if the insured dies while employed. It’s ideal for SMEs as it offers business-paid benefits with personal protection.

There’s a lot more to Relevant Life Insurance than tax savings. From morale to recruitment to peace of mind, it’s a business-savvy choice that many SMEs don’t even realise they need. Let’s explore how it works and why it fits perfectly with small businesses.

Give your team peace of mind while cutting costs. Tap the link now to explore how Relevant Life Insurance for SME can benefit your business.

Why Choose Relevant Life Insurance for SMEs?

Relevant Life Insurance is a unique type of policy tailored for small businesses. It’s designed to provide a death-in-service benefit for employees or directors, paid for by the business but benefiting their families directly. While large companies often offer group life cover, SMEs typically don’t have access to those schemes—Relevant Life fills that gap perfectly.

This policy is an efficient way to offer a valuable benefit to employees while gaining significant tax advantages. It’s also a way to boost company culture, improve staff retention and offer genuine care for your team—without having to commit to expensive group schemes.

Unlike personal life cover, which uses net income, Relevant Life Insurance premiums are paid by the business, making it an allowable business expense in many cases. That means no National Insurance contributions, no benefit-in-kind implications, and no Income Tax or Corporation Tax hurdles.

It’s a win-win for both employer and employee.

What Makes It So SME-Friendly?

Here are the main reasons SMEs choose Relevant Life Insurance:

This policy allows small companies to look after key team members as larger corporations do, but without the high overheads. It’s especially popular among contractors, directors and small teams with fewer than 5 employees.

How Does It Work?

A Relevant Life policy is a life insurance plan arranged and paid for by the employer. If the insured employee dies while covered, the policy pays a lump sum to a trust, which then passes the funds to the employee’s nominated beneficiaries. Here’s a simple step-by-step breakdown:

1. Policy Set-Up: The employer takes out a Relevant Life policy on an employee or director.
2. Trust Creation: The benefit is written into a discretionary trust.
3. Premium Payments: The business pays premiums directly—tax-deductible in most cases.
4. Benefit Paid: If the insured dies while working for the company, the trust pays the benefit to their loved ones.

This method ensures that the payout is usually free from Inheritance Tax, and it avoids adding the value to the employee’s estate.

Is Relevant Life Insurance Right for All SMEs?

While ideal for most SMEs, it’s especially useful in these cases:

• Director-only companies: where a single person is both employer and employee.
• Start-ups and small teams: that can’t access group schemes.
• High earners: who have used up their pension allowances and need extra cover outside of pension-linked benefits.
• Businesses focused on wellbeing: who want to offer tangible support without big cost.

It’s not suitable if you’re looking to insure a group under one plan. For that, a Group Life policy would be better. But for everything else, Relevant Life is perfect.

Tax Benefits for the Business and the Individual

One of the main draws of Relevant Life Insurance is its tax efficiency. Here’s how both the employer and employee benefit:

For the Employer:

• Premiums are typically tax-deductible.
• No National Insurance contributions due.
• Doesn’t count as a P11D benefit, so no extra admin.

For the Employee:

• Not taxed as a benefit-in-kind.
• Doesn’t affect Annual or Lifetime Allowance for pensions.
• Paid to family free of Inheritance Tax.

Here’s an example to see how much it saves:

Savings over 10 years: over £10,000 in tax.

Protecting Key People and Families

Relevant Life Insurance isn’t just about the numbers. It shows employees and directors that the company values them beyond their job. In times of loss, it provides financial protection for families when they need it most.

Directors and key employees often have families who rely on their income. This type of cover gives peace of mind, knowing that even if the worst happens, loved ones are supported.

As a small business owner, offering this kind of benefit can also set you apart from others in your industry. It shows care and a long-term mindset—both of which appeal to new talent and loyal staff.

Easy to Set Up, Easy to Manage

Many business owners avoid insurance because it sounds complicated. But Relevant Life Insurance is actually simple to set up:

• Apply through a broker or insurer.
• Fill in employee details and medical questionnaire.
• Set up the trust—many insurers help you do this for free.
• Decide on cover amount and duration.
• Pay monthly or annual premiums.

Once set, the policy is easy to manage and requires minimal admin. It’s scalable, too—you can add more employees later on.

Why Isn’t Everyone Using It?

Truth is, many SMEs still don’t know about Relevant Life Insurance. It’s underutilised despite its benefits. The main reasons?

• Lack of awareness from brokers and accountants.
• Misconception that life cover is too costly or only for big firms.
• Confusion about tax rules and trusts.

But once business owners learn the benefits, most see it as a no-brainer. In fact, more accountants now recommend it to clients as a smart way to support directors and reduce Corporation Tax.

Want to set up Relevant Life Insurance for your SME? Click the link below to speak to a specialist and get a tailored quote in minutes. Protect your people and your profits—start today.

FAQ

What is Relevant Life Insurance?

It’s a life insurance policy set up by a business to protect an employee or director. If they die, a lump sum goes to their family through a trust.

Is it only for directors?

No, it’s for any employee—though many directors use it for personal cover through their business.

Is it tax-deductible?

Yes, in most cases. The business pays the premiums and can claim Corporation Tax relief.

What’s the difference from personal life cover?

Personal cover is paid with your own income and may be taxed. Relevant Life is paid by your business with potential tax savings.

Is it hard to set up?

Not at all. Most providers help with the trust and application. It usually takes a few days to arrange.

Can contractors use it?

Yes! It’s ideal for contractors running their own limited companies. It’s also great for sole directors with no employees.

Final Word

Relevant Life Insurance is tailor-made for SMEs. It helps you protect your team, reduce tax, and stand out as a caring employer. For smart business owners, it’s not just a policy—it’s a strategic advantage.

Click the link below to get started today.