The cost of a Directors Life Insurance policy varies according to several factors, including:
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Director’s life insurance is life cover benefit in kind (P11D) arranged and paid for by your limited company rather than out of your personal income. The premiums are normally corporation tax deductible, the policy is HMRC-approved, and the cover is written into a discretionary trust so the payout reaches your family quickly without forming part of your estate. For most directors, it works out 30-49% cheaper (depending on your tax bracket) than funding the same cover personally.
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Life insurance for company directors – often referred to as relevant life insurance – is similar to death-in-service policy. It’s arranged by the company on behalf of a director or employee. It follows the rules set by HMRC under the Income Tax (Earnings and Pensions) Act 2003, which means the company can pay the premiums as an allowable trading expense. The cover is written into a discretionary trust from day one, so the payout goes to your chosen beneficiaries directly, outside your estate.
Three things make this different from a standard personal life policy. First, premiums paid by the company are corporation tax deductible, so the business gets relief on the cost. Second, the cover does not count as a benefit in kind (P11D), so there’s no income tax or National Insurance payable on the benefit. Third, because the payout sits in a discretionary trust, it falls outside your estate and is therefore free of inheritance tax – unlike most personal policies.
Use our Relevant Life Insurance Calculator to see how much your company could save with this type of cover.
Most directors pay for personal life cover out of their net salary or dividends, having already paid income tax and National Insurance on the money first. Arranging the same cover through your company reverses that logic. The company pays the premiums before tax, claims the cost as a business expense, and you receive the same level of protection at a fraction of the personal cost.
A higher-rate taxpayer paying 40% income tax and 2% employee National Insurance would need approximately £172.41 of gross employment income to pay a £100 monthly premium personally. If the company pays the same £100 premium and receives corporation tax relief at 19%, the effective cost to the business could be around £81. There is no benefit-in-kind charge on a qualifying Relevant Life policy, making it considerably more cost-effective than funding similar cover from taxed personal income. This type of director’s life insurance – also called relevant life insurance – is one of the most tax-efficient ways to provide personal life cover for directors and employees of UK limited companies. It works for sole directors, employees, and contractors operating through their own company.
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Policies for company directors’ life insurance work in a similar way to traditional life insurance but with one key difference — they’re structured for tax efficiency and business ownership.
| Feature | Director Life Insurance | Personal Life Insurance |
|---|---|---|
| Who Pays? | Paid by the company | Paid personally |
| Tax Treatment | Usually corporation-tax-deductible | Paid from after-tax income |
| Benefit-in-Kind | None – P11D-exempt | Not applicable |
| Payout | Tax-free to beneficiaries | Usually tax-free, but may count towards inheritance tax |
| Policy Ownership | Owned by the company, held in a trust | Owned by the individual |
| Eligibility | Employees and directors of a limited company | Anyone applying personally |
This setup allows businesses to offer valuable personal protection to directors or key employees, without the tax burden that comes from traditional life insurance.
The company takes out a policy on the director’s life, pays the premiums, and the policy is immediately written into a discretionary trust. The trust means the payout never passes through the director’s estate. When a claim is made, the money goes directly to the named beneficiaries, quickly and free of inheritance tax.
Because the company owns the policy and funds the premiums and, those costs are treated as an allowable business expense in the same way as other staff costs. The cover itself is structured to meet HMRC rules, and since it doesn’t show on a benefit in kind (P11D) return, the director has no personal tax or National Insurance liability arising from the premium payments.
The sum assured is typically calculated against the director’s total remuneration – salary plus P11D benefits, but not dividends. Policies run on a fixed term basis, usually to retirement age or age 75 at the latest. We help you work out the right level of cover as part of the quote process.
“If you’re not sure whether your business qualifies for this type of cover, it only takes a minute to check. Most limited companies and salaried directors do — and the savings are often far more than people expect.”
At its core, this is a term life policy. It pays a lump sum to the discretionary trust if the director dies during the policy term. Most providers also include terminal illness cover as standard, paying out early if the insured is diagnosed with a condition likely to result in death within 12 months.
Serious illness cover can sometimes be added to a director’s life assurance policy for an additional premium. This pays out on diagnosis of a specified condition such as cancer, stroke, or heart attack. Not all providers offer this alongside the company-paid structure, so it’s worth asking us to check when you request your quote.
What the cover does not include: income protection, investments, or any surrender value. It is a pure life policy – straightforward, efficient, and designed to do one job well.
Life insurance for company directors is relevant to anyone running or employed by a UK limited company who wants personal life cover without funding it from personal taxed income. In practice, that covers most sole directors, co-directors, and salaried employees of small and medium-sized businesses.
It’s particularly worth arranging if you currently have a personal life policy you’re paying for yourself. Switching to a company-funded policy – with the same insurer if you prefer – can often deliver an immediate saving without any reduction in cover. If you’re a higher-rate taxpayer, the saving is larger still because you’re no longer funding the premium from income that’s been taxed at 40%.
Contractors operating through their own limited company can also use this structure, provided they’re on the company’s payroll. Life insurance for limited company directors works the same way regardless of whether you’re a sole director or part of a larger team. We’ll confirm eligibility as part of the application process.
Many directors also pair their cover with other protection policies such as Private Health Insurance and Shareholder Protection for complete peace of mind.
The maximum sum assured is capped by HMRC at a multiple of total remuneration – salary and benefits, but not dividends. Most insurers apply the following age-based multiples:
For directors who pay themselves a low salary and take most of their income as dividends, this cap can be a constraint. A director on a £12,570 salary has a maximum sum assured of around £376,000 under the 30x multiple. If that’s not enough, we can talk through alternatives that may work alongside a company-funded policy.
Finding the most suitable value on Director Life Insurance isn’t just about choosing the price — it’s about securing the right policy structure, tax efficiency, and trusted protection for your company and family. Here’s how to make sure you’re getting the most out of your cover:
As a specialist business protection broker established in 2008, we’ve helped thousands of UK directors arrange life cover that’s both compliant and cost-efficient. We’ll handle everything from quote comparison to trust setup — so you can focus on running your business.
The cost of a Directors Life Insurance policy varies according to several factors, including:
Director’s life insurance UK premiums are based on the individual’s age, health, smoker status, the sum assured, and the policy term. For a healthy non-smoking director in their forties, a £500,000 policy can often be arranged for under £40 per month.
Here’s a straightforward worked example of why the company-funded route makes financial sense. Take a director on a £50,000 salary paying 40% income tax plus 2% National Insurance on earnings. To fund a £100 monthly premium personally, they need £142 of gross income. The same premium, paid by the company, costs £100 before relief, and with corporation tax deductible treatment at 19% the net cost to the business is around £81. Same cover, roughly 43% cheaper in real terms.
As director life insurance specialists, we compare cover from a wide range of UK providers to find the most suitable option for your circumstances. Premiums are usually similar to standard Relevant Life Insurance or personal term assurance, so the main saving comes from the company paying for the cover rather than you funding it from taxed personal income.
The pension lifetime allowance is the maximum amount you can save in your pension pot without paying tax. If you exceed the limit in your pension savings, you will pay tax on the additional funds (the current rate is 55% for a lump sum payment and 25% for cash withdrawals and pension payments). The pension lifetime allowance for 2022/2023 is £1,073,100. The limit has been frozen until 2025/2024 (source).
One major advantage of a director’s life insurance policy is that it doesn’t impact the pension lifetime allowance. The policy does not count towards the pension pot, meaning that it can help directors avoid paying tax on their pension savings.
You can read more here about pension schemes and whether your business would benefit.
Applying for company Directors Life Insurance cover is similar to applying for a personal life policy. Once you have researched plans and providers, the next step is to fill in the application form. This can be done quickly and easily . You will be asked to provide information to get a quote for your cover. You’ll need to provide details about the medical history and lifestyle of the insured personnel.
Examples of questions you will be asked answer include:
Insurance providers will use the information you give them to figure out the premium. If you are happy with the quote and you wish to go ahead, you’ll need to complete the policy application form, which includes adding the names of the policy beneficiaries. If the company is satisfied that you meet the criteria, they will approve your application, and your cover will start on the agreed date. Your business will pay the agreed monthly or annual fee for the duration of the term.
If you run a limited company, and you’re thinking about getting life cover, there are two main options. You can buy a Personal Life Policy or take out Directors Life Insurance. Director life policies offer a raft of benefits for small businesses.
Benefits include:
Getting Life Insurance for company directors also benefits the business itself. The cover is an attractive benefit for prospective directors and can help attract them to the position.
3 Simple Steps.
Submit the details of the key member of staff
We compare the quotes
and submit application to underwriting.
What people are saying about us.
Jody was very helpful in explaining the options and I thoroughly recommend his company
We received a wonderful service from mykeyman and will be using them again. The service and product knowledge from team is excellent. Everything was made easy to understand. The price was the most suitable we found too.
The standard of service was first class. They kept me up to date with progress on my Relevant Life Policy, followed up promptly following delays caused by my medical practice being slow in compiling reports, and responded instantly and clearly to any questions I had.
Jody was very helpful in explaining the options and I thoroughly recommend his company
The standard of service was first class. They kept me up to date with progress on my Relevant Life Policy, followed up promptly following delays caused by my medical practice being slow in compiling reports, and responded instantly and clearly to any questions I had.
We received a wonderful service from mykeyman and will be using them again. The service and product knowledge from team is excellent. Everything was made easy to understand. The price was the most suitable we found too.
Jody was very helpful in explaining the options and I thoroughly recommend his company
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A benefit in kind, also known as a BiK, is a product or service, which is given to a company employee free of charge or at a heavily discounted rate. All employers are legally required to disclose benefits in kind. Benefits in kind are sometimes known as fringe benefits and they are usually perks that are not included in the employee’s salary or employee benefits package.
Director’s life insurance is not classed as a P11D benefit in kind by HMRC. This means that company bosses do not have to pay additional income tax or National Insurance contributions on them.
Director’s life insurance cover is tax deductible. This type of policy is classed as a business expense. When you file your taxes, you can deduct the policy cost, reducing your corporation tax outgoings. It’s deductible primarily because it’s considered a legitimate business expense.
Here’s a concise explanation:
The UK tax authorities (HMRC) recognise it as an allowable business expense because they’re viewed as a form of employee benefit that serves a clear business purpose. By providing financial protection for key employees and their families, the policy helps the company attract and retain valuable staff. This, in turn, contributes to the stability and continuity of the business.
Since the policy is taken out to benefit the business (by protecting its crucial human assets) rather than for personal gain, the premiums can be treated as a business expense. This allows the company to deduct the cost from its taxable profits, effectively reducing its corporation tax liability.
You can check out our relevant life insurance taxation page for more details on how director’s life insurance is taxed.
It depends on the cover you take out. The more comprehensive the cover, the higher the premiums will be. You can contact us to discuss a quote for your company’s needs.
Most UK life providers offer directors cover. Examples including; IG, Aviva, Legal & General, Scottish Widows, Zurich, Liverpool Victoria (LV), Vitality, Royal London and Aegon.
To find life cover for company directors, it’s beneficial to research , use search engines, read reviews and contact companies to compare quotes and get prices.
The main areas of distinction between personal and director life insurance are their intended uses and tax implications. Director life insurance is a company-paid policy designed for employees and directors of businesses, offering tax benefits. Premiums are typically tax-deductible for the company and not treated as a benefit-in-kind for the insured. The payout is usually tax-free for beneficiaries.
In contrast, a personal policy is taken out by individuals to protect their families, with premiums paid from after-tax income with no corporate tax advantages. While both provide a payout on death, director life policy is more closely tied to one’s role in a business, whereas personal life insurance offers broader coverage regardless of employment status.
Use our relevant life calculator to see the difference in premiums and what can be saved by using director life insurance.
Critical illness is not available with director life insurance plans, as it is not an approved tax benefit, according to HMRC. If you have life cover through a limited company, you may be covered if you are diagnosed with a terminal illness and you are expected to live for less than 12 months. However, AVIVA do offer a significant illness option which is a scaled-down version of critical illness.
Director’s life insurance is a life cover policy arranged and paid for by a UK limited company on behalf of a director or employee. Premiums are corporation tax deductible, the policy is written into a discretionary trust for the director’s beneficiaries, and there is no benefit in kind (P11D) charge. This makes it considerably more tax-efficient than a personal life policy, particularly for higher-rate taxpayers who would otherwise fund premiums from after-tax income.
Yes. Director life insurance and relevant life insurance describe the same type of policy. “Director life insurance” is simply the term many directors search for when looking for tax-efficient company-funded life cover. The underlying product is a relevant life insurance policy governed by HMRC rules under ITEPA 2003. The two terms are used interchangeably by most directors life insurance companies and advisers.
Premiums for life insurance for directors depend on age, health, the sum assured, and the term. A non-smoking director in their forties can typically arrange cover for under £40 per month. After corporation tax deductible relief at 19%, the real net cost to the company is lower still. The best way to get an accurate figure for your situation is to request a quote – it takes a few minutes and there’s no commitment.
Yes, some providers allow serious illness to be added alongside the life element. It pays out on diagnosis of a specified serious condition – typically cancer, heart attack, or stroke – and works in the same discretionary trust structure as the life policy. Adding it does increase the premium, and not every insurer offers this as a company-paid option, so availability varies. We check this as part of the director’s life insurance comparison when we search the market for you.
The maximum sum assured is capped at a multiple of total remuneration (salary and benefits, not dividends): 30 times for directors under 40, 20 times for those aged 40-49, and 15 times for those 50 and over. For a director on a £30,000 salary aged 38, that’s a maximum of £900,000. If your dividend income is much higher than your salary, this cap may limit the director’s life assurance level available to you, and we can discuss options for bridging that gap.
Director, My Key Finance Ltd – FCA Regulated (FRN 628996)
“After 15 years advising directors, I still meet many who pay personally for life cover when it could be funded through their company — saving up to half the cost. This page explains exactly how to do it the right way.”
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Director’s Comment
“When I explain this to directors for the first time, they’re often surprised by the savings. Paying for life cover through your company is HMRC-approved and avoids a P11D charge — one of the simplest ways to protect your family and keep more of your income.”
— Jody Pearmain, Director of My Key Finance Ltd · Connect on LinkedIn