Many directors first hear about relevant life insurance after they have already sorted most of the obvious tax planning. Salary has been set. Dividends are being managed. Pension contributions have been planned. Then somebody points out that the life insurance premium is still coming out of the director’s personal account every month, even though the company could potentially be paying for the cover instead. That is usually the moment the real question appears: who is eligible for relevant life insurance? (HMRC; Legal & General)
The short answer is that relevant life insurance is built for people who have a genuine employer-employee relationship with a company. In practice, that usually means employees and salaried company directors of a UK business. It is not generally aimed at people working for themselves with no employing company around them. (Legal & General; Legal & General)
What HMRC says a relevant life policy is
HMRC treats a relevant life policy as a specific kind of employer-funded life cover. Its guidance says a relevant life policy can be a policy that pays a capital sum on the death of a single individual, with no surrender value, a maximum specified age of no more than 75, and beneficiaries restricted to individuals and charities. HMRC also says any benefit-in-kind charge may be exempted by section 307, depending on the circumstances. That is why relevant life is usually discussed as a company-paid structure rather than a standard personal life insurance plan. (HMRC; HMRC)
That is worth pausing on. Relevant life is not just personal cover with a better label. It is a policy shape that only really works when there is a business paying for cover on an employee or director.
The cleanest way to think about eligibility
If you are trying to work out who is eligible for relevant life insurance, it helps to strip away the jargon and look at the actual working relationship. If the company can properly be described as your employer, you are usually in the right territory. If there is no employer-employee relationship, you are usually not. The person covered must be an employee of a UK business, which can include salaried company directors, and the plan is not currently available for sole traders, equity partners in a partnership or members of a Limited Liability Partnership. Relevant life plans are not available where there is no employer-employee relationship.
Relevant life eligibility at a glance
| Usually eligible | Usually not eligible | Why |
| Employees of a UK limited company | Sole traders | Relevant life is built around an employer paying for cover on an employee |
| Salaried company directors | Equity partners in a partnership | Providers look for a real employer-employee relationship rather than self-employed or partnership status |
| Directors who are employees of their own limited company | Members of a Limited Liability Partnership | Legal & General’s guide excludes LLP members and equity partners from this product structure |
Why company directors are such a natural fit
For directors of limited companies, relevant life insurance tends to make sense because the company can pay for the premium rather than the director paying for cover personally from money that has already been taxed. HMRC says that where section 307 applies, the qualifying element is exempt from tax under the benefits code. HMRC’s National Insurance guidance also says that Class 1A NIC is not due where a benefit is exempt from income tax under one of the listed statutory exemptions, and section 307 sits in that list. That is the technical reason relevant life is often described as tax-efficient for directors. (HMRC; HMRC)
The company-side tax treatment needs slightly more careful language. GOV.UK says a revenue expense can be deducted from company profits only if it is not specifically disallowed and only has a business purpose under the wholly and exclusively principle. So the sensible version is not “relevant life is always deductible”, but “relevant life is typically treated as deductible when it is set up correctly, and the facts support that treatment”. For directors, that is still an attractive position. It just needs to be explained honestly. (GOV.UK)
The part directors often overlook
A common real-world pattern is that directors assume the only thing that matters is whether they can get the cover. In practice, the structure matters just as much. Legal & General says the company takes out the plan on the life of the employee and the plan is put in trust for the employee’s chosen beneficiaries. HMRC’s trust guidance says life insurance policies are often written into trust for estate planning and to ease the distribution of funds following death. That is part of what makes relevant life feel more suited to company directors than a standard personal policy that has simply been left to run for years. (HMRC)
So, who is eligible for relevant life insurance?
For most readers of this piece, the practical answer is straightforward. If you are a director of a limited company and you are genuinely employed by that company, you are usually the kind of person relevant life insurance is meant for. If you are a sole trader, an equity partner, or a member of an LLP, you are usually outside the intended scope of the product.
That is the main takeaway. Relevant life is not for everyone, and that is precisely why it can work so well for limited company directors. It is a narrower, more deliberate way to hold life insurance, and for the right person, it usually fits the company structure far better than a normal personal policy. (HMRC; HMRC)
