Relevant Life vs Death in Service

Decision Guide

Relevant Life vs Death in Service

Both are employer-funded life insurance products that pay a tax-free lump sum to an employee’s family if they die. The one difference is that relevant life covers an individual, death in service covers a group.

By Natalie Brown, Senior Business Protection SpecialistUpdated June 2026 · 6 min read

Our verdict

If you want tax-efficient life cover, paid by the company, for yourself or a specific individual, a relevant life policy is normally the best option.

If you want to cover a group of employees, then death in service is the better option.

The short answer

Relevant Life

A life insurance policy your company takes out and pays for on your behalf, so that if you die your chosen beneficiaries receive a tax-free lump sum, funded from pre-tax company money rather than your own pocket.

Death in Service

A life cover benefit an employer provides to their workforce, paying out a multiple of an employee’s salary to their family if they die while employed by the company.

The core difference

Who the product is designed for. Relevant life covers one named individual, arranged by their employer specifically for them. Death in service covers a group of employees under a single scheme, where membership comes with the job and ends when the employment does.

Which is right for you?

Choose Relevant Life Insurance if…

You run your own limited company or limited liability partnership, pay yourself through it, and want cover for yourself
You need a higher level of cover than a group scheme multiple would provide, for example because your mortgage, business debts, or family’s income needs are substantial
You want full control over who benefits from the policy, with a trust structure set up specifically around your own family circumstances
Your family depends on you financially and you want to make sure a lump sum reaches them directly, outside your estate and without going through probate

Choose Death in Service if…

You employ a team of people and want to offer a meaningful life cover benefit without arranging a separate policy for everyone
You are thinking about how to attract and retain staff
You want the simplest possible setup: one policy, one renewal, one insurer covering your whole workforce without individual underwriting for each person
A standard 2 to 4 times salary multiple is adequate cover for your staff, and you do not need to tailor the sum assured for specific high-earning individuals

Side-by-side comparison

Nine points, each opens for the detail

Relevant Life

Death in Service

Relevant Life:The companyThe limited company or LLP pays the premium from pre-tax profits.

Death in Service:The employerPays 100% of the premium, but you need a group of employees to run a scheme. Not suitable for sole directors.

Relevant Life:Funded from pre-tax moneyTypically a deductible business expense. Normally not a P11D, no income tax, no NI for the director.Better here

Death in Service:Also a business expenseIn a registered group scheme there can be interaction with pension tax rules for higher earners. Broadly similar where available.

Relevant Life:Works for a sole directorProvided you have a genuine employment relationship with your own company.Better here

Death in Service:Needs a groupA sole director or micro-business might not be able to access a group scheme. Minimum group size required.

Relevant Life:Up to £1 millionUp to 25x your director’s remuneration package, depending on age.

Death in Service:2 to 4 times salaryA group scheme norm. Less flexible; the multiple applies uniformly across the scheme.Better here

Relevant Life:Individual trustWritten under a discretionary relevant life trust. The payout goes directly to nominated beneficiaries, outside your estate and the company balance sheet. No IHT, no probate.Better here

Death in Service:Scheme-level trustPaid via a discretionary trust at scheme level. Generally outside the estate, but set at the group level, so less tailored to an individual director’s family.

Relevant Life:Separate from your pensionNo interaction with the pension allowances.Better here

Death in Service:May interact for high earnersLump sums from a registered group scheme can interact with pension allowances for high earners.

Relevant Life:Tied to the companyIf you close, sell, or restructure the company you will have to convert the policy into a personal one. Plan for company changes.

Death in Service:Ends with employmentCover ceases immediately when employment ends. As a director this is especially relevant if you ever exit or wind up the company.

Relevant Life:One life to insureIndividual underwriting, a trust deed, one policy per person. More setup upfront, but as a director there is only one life, so ongoing admin is minimal.Better here

Death in Service:Group policy plus HR adminOne group policy covering all staff, requiring a minimum workforce and ongoing HR admin as headcount changes. Not viable without a workforce.

Relevant Life:Efficient for one directorIndividual underwriting reflects your age, health, and sum assured. Pre-tax funding usually makes this much cheaper in real terms than a personally funded policy.Better here

Death in Service:Cheaper per head at volumeGroup rates are cheaper per head, but that advantage only exists with enough employees. For a sole director there is no group to join.

Real-world scenarios

Illustrative examples showing how the decision tends to play out. Names and figures are for illustration only.

Scenario 1

Sarah, sole director of a marketing consultancy

Sarah pays herself a £50,000 salary and takes £80,000 in dividends. She currently pays £120 a month for personal life insurance from her own post-tax income.

Read the full scenario

By switching to a relevant life plan through her company, the same cover is paid from pre-tax profits, saving her roughly £30 to £40 a month in real terms once the corporation tax deduction is factored in.

With no employees, a group scheme is not an option. Relevant life is the only product available to her, and the more efficient way to fund it.

Scenario 2

James, director of a logistics firm with 40 employees

James wants to offer a life cover benefit as part of his package to reduce staff turnover. A death-in-service group scheme at 3x salary can cover his entire workforce.

Read the full scenario

Setting up 40 individual relevant life plans would require 40 separate applications, 40 trust deeds, and individual underwriting for each person.

Death in service is simpler, cheaper at this scale, and the right tool for the job.

Scenario 3

David, director of a software agency that is scaling

David has 4 employees and is hiring quickly. He takes a £40,000 salary, with a relevant life sum assured of £1,000,000 to suit his mortgage and family commitments.

Read the full scenario

His team is too small for most group scheme minimums right now, so he takes out relevant life plans for himself and his two co-directors. Within 18 months the company’s headcount reaches 10.

At that point, adding a death-in-service scheme for the wider team starts to make sense, cheaper per head at group rates and easier to administer as the business scales. He keeps his relevant life plan for the directors and layers the group scheme on top for everyone else.

The rule of thumb

If you are covering one personUse Relevant Life

If you are covering a workforceUse Death in Service

Frequently asked questions

Is the relevant life premium a taxable benefit for me as a director?

No. This is one of the main advantages. The company pays the premium, but it does not appear on your P11D, and you do not pay income tax or National Insurance on it. You are effectively getting life cover funded from pre-tax company money, which makes it considerably more efficient than buying the equivalent personal policy from your own post-tax income.

I am the only director in my company with no employees. Which one can I use?

Relevant life only. Death in service is a group product, and insurers require a minimum of around 3 to 5 lives to set up a scheme. A sole director does not meet that threshold. Relevant life was specifically designed to work for individuals employed by their own company.

What happens to my relevant life cover if I close or sell the company?

The policy is tied to the company as the employing entity, so it does not automatically continue if the company ceases to exist. Some insurers offer options to assign the policy or convert it to a personal policy, sometimes without new underwriting. This needs to be planned ahead of any exit or restructure; do not leave it until after the event.

I am an employee, not a director. Is relevant life even an option for me?

Technically yes, relevant life can be arranged for any employee, not just directors. In practice it is most used for directors and high earners where the tax efficiency and higher cover levels justify the individual underwriting and setup costs. For most employees, being enrolled in a company death-in-service scheme is simpler and more cost-effective.

Does the payout count as part of my pension for tax purposes?

No. A relevant life payout sits entirely outside the pension regime and does not interact with the lifetime allowance. Death-in-service lump sums from a registered group scheme can in some cases count toward the lifetime allowance, which matters for directors or high earners who have already accumulated significant pension savings.

Will a relevant life insurance policy payout affect my family’s inheritance tax position?

Not if the policy is set up correctly. Relevant life insurance uses a discretionary trust to hold the benefit, which keeps the lump sum outside your estate. Your beneficiaries receive the money directly without it being subject to IHT or passing through probate. The key is making sure the trust is properly established at outset.

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This guide is general information about how these policies work and is not personal advice or a recommendation. Tax treatment depends on your individual circumstances and the rules may change. The figures in the scenarios are illustrative only. Consider speaking to a qualified adviser before deciding what is right for you.

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