Relevant life vs personal life cover
For a salaried company director, a relevant life policy is usually more tax-efficient than personal life cover: the company pays the premiums as a business expense and the payout is typically free of income and inheritance tax. Personal cover is simpler but funded from taxed income.
The core difference
Personal life insurance is bought and paid for by you from income you’ve already been taxed on. A relevant life policy is taken out by your limited company on your life, with the company paying the premiums — usually an allowable business expense — and the benefit written in trust, normally free of income and inheritance tax.
How they compare
| Factor | Personal life cover | Relevant life policy |
|---|---|---|
| Who pays | You, from taxed income | Your company, pre-tax |
| Tax on premiums | None deductible | Usually a deductible business expense |
| Payout | Can be written in trust | Can be written in trust; designed to be IHT-efficient |
| Eligibility | Anyone | Salaried director/employee of the company |
- Who pays: personal cover — you, from taxed income; relevant life — your company, pre-tax.
- Tax on premiums: personal — none deductible; relevant life — usually a deductible business expense.
- Payout: both can be written in trust; relevant life is designed to be IHT-efficient.
- Eligibility: relevant life needs you to be a salaried director/employee of the company.
Which should a director choose?
If you’re a salaried director, relevant life is often the more efficient way to hold a given amount of cover. Personal cover still suits those without a company, or where relevant life doesn’t fit. Many directors hold a relevant life policy alongside income protection.
- Salaried directors usually gain from relevant life’s tax treatment.
- Personal cover is simpler but funded from taxed income.
- Both can be written in trust for speed and IHT efficiency.
- Take advice — the right answer depends on your whole setup.
Beyond the tax point
Most comparisons stop at who pays the premium, but three practical differences matter as much. A relevant life policy is normally written in trust from the outset, so the benefit passes directly to the family without waiting for probate. It is generally arranged as single life cover rather than joint, since it attaches to an individual employee. And it is tied to the employment relationship — if that ends, the arrangement needs revisiting.
That last point is the one most often overlooked. Contractors who return to permanent employment, or close a company between engagements, can find the arrangement no longer fits and only discover it later.
Which to choose, and when to hold both
If you are a director of a limited company and the cover is straightforward life protection, the company-paid route is usually worth comparing first. If your circumstances are less settled — you might return to employment, or the company may not continue — personal cover you own outright has a simplicity that is worth something.
Holding both is not unusual: a relevant life policy sized around the mortgage while the company runs, and a smaller personal policy that stays with you regardless. Neither replaces income protection, which covers a different risk entirely.
Directors, answered
Is relevant life always better than personal cover?+
For a salaried director it’s usually more tax-efficient for the same cover. But it depends on your company setup and circumstances, so it’s worth confirming with advice rather than assuming.
Can a contractor with their own company get relevant life cover?+
Usually yes — as a salaried director of your own limited company you can typically take cover on yourself through the business. We’ll confirm eligibility for your structure.
Does relevant life replace mortgage life cover?+
It can serve the same protective purpose efficiently, but the right amount and structure should be matched to your mortgage and family needs.
What happens to a relevant life policy if I close my company?+
It generally needs to be reviewed, because the arrangement depends on the employment relationship with the company that took it out. Cover does not automatically transfer to you personally or follow you into a new role. If closing the company is a possibility, raise it before the change rather than after.