11 Purdeys Way, Rochford, England, SS4 1ND
11 Purdeys Way, Rochford, England, SS4 1ND
As with Relevant Life Insurance, Personal Life Insurance is a type of life insurance designed for business owners, company directors, and employees. In the event of your death, a lump sum payout is given to your beneficiaries. This money can help your loved ones cover costs such as the mortgage or rent, household bills and childcare. Some policies also include Critical Illness cover as an add-on option, but this isn’t guaranteed. You may need to buy Critical Illness cover as a separate policy.
The Personal Life Insurance policy is paid for and owned by the individual, rather than the company. This means that the policy transfers with you if you leave your current job or company. You also have more flexibility as you own the policy. This means you can choose your beneficiaries and choose the level of cover.
There are various similarities and differences between relevant life insurance vs life insurance, as detailed in the table shown below.
FEATURE | RELEVANT LIFE INSURANCE | PERSONAL LIFE INSURANCE |
Tax Benefits | Premiums are paid by the company and can usually qualify as an allowable business expense. | Premiums are paid by the individual and are not tax-deductible. |
Cost | Typically lower due to tax efficiency. Can be exempt from Income Tax and National Insurance contributions. Lump sum may also be exempt from Inheritance Tax | Higher due to no tax deductions. |
Coverage Amount | Can be higher based on company earnings. | Dependent on personal financial situation. |
Flexibility | Less flexible, tied to the company. | More flexible, individual can choose coverage amount and terms. |
Beneficiary | The employee can nominate who they would like the trust benefits to go to, with the trustees responsible for paying the proceeds to beneficiaries. | Individuals can choose the beneficiary. |
Portability | Isn’t automatically transferred: coverage ends when employment ends. | Individual owns the policy so can keep the insurance, even if they change jobs. |
Each insurance company has slightly different conditions and coverage, so it’s advisable to check the terms and conditions of each policy to see if it’s the right choice for you.
There are various costs to consider for Relevant Life Insurance vs Life Insurance, as shown in the table below.
ITEM | RELEVANT LIFE INSURANCE | PERSONAL LIFE COVER |
Annual Premium | £1,000.00 | £1,000.00 |
Personal Income Needed to Fund Premium | Company Pays Directly | £1,724 |
Income Tax | £0.00 | £690 |
Employee National Insurance | £0.00 | £34 |
Corporation Tax Saving | £250 | £0.00 |
Total Cost to Business/Individual | £750 | £1,724 |
Net Savings | £974 | £0.00 |
In this 2026/27 illustration, a higher-rate taxpayer above the Upper Earnings Limit needs about £1,724 of gross salary to have £1,000 left after 40% Income Tax and 2% employee National Insurance. If a £1,000 Relevant Life premium qualifies for Corporation Tax relief at the 25% main rate, its effective company cost is about £750 — an illustrative difference of roughly £974 before considering employer National Insurance. At the 19% small profits Corporation Tax rate, the effective cost would be about £810.
You can use our helpful Relevant Life Insurance calculator to help you compare the potential tax savings for your company of Relevant Life Insurance vs Life Insurance.
One of the alternatives to Relevant Life Insurance is Group Life Insurance. This policy is particularly popular for larger businesses that need to insure lots of employees, directors and contractors.
Group Life Insurance (also known as Death in Service Benefit) is a policy that provides life cover to multiple employees within a business under a single plan. As with Relevant Life Insurance and Personal Life Cover, if an insured employee passes away while employed, a tax-free lump sum is paid to their nominated beneficiaries.
The business owns the policy and pays the premiums (which are tax-deductible). The payout is typically a multiple of the employee’s annual salary, such as 2x, 4x, or 10x the salary.
Group Life Insurance isn’t suitable for sole directors as it requires your company to have multiple employees to qualify.
Relevant Life Insurance is a great option for smaller businesses that don’t have enough employees for group life insurance or prefer a more tailored option for team members. You can get Relevant Life Cover as long as you have a limited company; sole traders and partners in Partnerships or Limited Liability Partnerships (LLP) aren’t eligible for Relevant Life Cover.
Employees, company directors and contractors employed by the company can all be covered by Relevant Life Cover, even if they are remote workers or based in different locations. This insurance is a great affordable alternative to a Group Life policy, particularly if the company is a startup with limited staff.
Relevant Life Insurance offers a number of tax advantages, particularly for company directors and small business owners. The premiums for Relevant Life Insurance are tax-deductible as they are considered a business expense. This insurance is also not considered a P11D benefit in kind, which means employers and employees don’t have to pay National Insurance contributions or Income Tax on the premiums, unlike a Personal Life policy. When the policy is written in a discretionary trust, the insurance money payout is also usually free from Inheritance Tax.
While Relevant Life Insurance and Personal Life Cover both provide life insurance protection, the cover you choose depends on your personal circumstances and the company’s position. Relevant Life Insurance can offer significant tax advantages when the company pays the premiums. Relevant Life Insurance is arranged and paid for by the company and is normally written into trust for the employee’s beneficiaries. If the employee leaves, the options for continuing or replacing the cover depend on the policy and provider.
It couldn’t be easier to find the most suitable Relevant Life Insurance for your business with www.mykeymaninsurance.com. We’ll provide you with a quote and help you compare the offers from various insurance companies. You can ensure the team members have proper coverage, while also providing tax-efficient benefits for the company.
Our friendly team will be more than happy to discuss the options for you and your business. We can also help you understand Relevant Life Insurance tax. Contact us by phoning 02071128844 or email us at info@mykeymaninsurance.com.
