Landlord Relevant Life vs Personal Life Insurance
A personal life policy pays your family if you die. So does a Relevant Life policy arranged through your property company. The difference is in who pays the premium, how it is taxed, and what your estate looks like when the time comes.
The short answer
An individual life policy arranged and paid for by your limited company, covering you as a director-employee. Premiums are typically an allowable business expense and not a P11D benefit in kind. The payout is written in a discretionary trust, so it generally falls outside your estate on death and is free from inheritance tax, subject to trust terms and HMRC conditions.
A life policy taken out in your own name and paid from your personal income. It can be written in trust to keep the payout outside your estate, but premiums are funded from money you have already paid income tax and National Insurance on. Flexible and available regardless of company structure, but typically less efficient for limited company directors.
While both policies pay a lump sum to your family on death, Relevant Life Insurance lets your property company fund that cover in a way that is generally more tax-efficient than paying from personal post-tax income. For limited company landlords, this distinction is often worth several hundred pounds a year.
Which is right for you?
- You own a property portfolio through a limited company and are a director and employee of that company
- You currently pay for a personal life policy and want to explore whether the company could fund it more efficiently
- You draw a combination of salary and dividends and want the cover to reflect your total package
- You want the payout to sit outside your estate without having to separately arrange a personal trust
- You have significant pension savings and want life cover that does not interact with pension allowances
- You want the premium to be a company expense rather than coming from personal funds you have already been taxed on
- You hold property personally or through a partnership rather than a limited company
- You do not draw a salary from your property company and may not qualify as an employee for Relevant Life purposes
- You want cover that is completely independent of your business structure and continues regardless of what happens to the company
- You are in the process of incorporating and want cover in place immediately before the company structure is finalised
- You need a very large sum assured that goes beyond what Relevant Life limits allow based on your remuneration
- You prefer simplicity and do not want cover tied to your employment by the company
Side-by-side comparison
Real-world scenarios
Illustrative examples showing how the decision tends to play out. Names and figures are for illustration only.
David, 12 buy-to-lets through a limited company
David pays himself a salary of £12,570 plus dividends of £55,000 per year. He has a personal term assurance policy costing £175 per month, which he funds from his personal income.
Read the full scenario
His accountant suggests the company could instead arrange a Relevant Life Insurance policy, with premiums paid as a business expense. The cover amount can be structured to reflect his total remuneration package.
His existing personal policy could potentially be cancelled once the new cover is confirmed, though David is advised to take specific tax and financial advice before making any changes.
Fatima, four properties held in her own name
Fatima manages four rental properties herself. She has a young family and a residential mortgage and wants life cover in place but has no limited company through which to arrange it.
Read the full scenario
Relevant Life Insurance is not available to her in this structure. A personal term assurance policy, written in a discretionary trust to keep the payout outside her estate, is the straightforward solution. The premium is paid from her personal income.
Fatima is considering incorporating her portfolio in the future, and her adviser notes that if she does, reviewing whether to restructure her cover through the company at that point would be worth doing.
James and Claire, portfolio held through an SPV
They hold their portfolio through a special purpose vehicle limited company and each draw a salary of £12,570 with dividends of £90,000 per year. Their combined estate is likely to be subject to inheritance tax on death.
Read the full scenario
They each have older personal life policies taken out before they incorporated, which are not written in trust and would fall into their estates on death. Their adviser suggests a two-stage review: first, arrange Relevant Life Insurance through the company for each of them, reflecting their total remuneration and structured to sit outside the estate via trust.
Second, review the existing personal policies: if the cover amounts are still needed for personal liabilities such as their residential mortgage, those policies could be retained but written into trust separately. The two sets of policies cover different needs and neither entirely replaces the other.
The rule of thumb
Frequently asked questions
What happens to my Relevant Life policy if I wind up or sell the property company?
Can I get relevant life insurance if I am a sole trader landlord?
Can a “one-person” limited company director apply?
How much cover can I get based on dividends?
Who receives the money if I die?
Does the payout have a cash-in value if I cancel?
Related decision guides
Not sure which is right for you?
Speak to one of our advisers. We will compare both options based on your specific circumstances, free and with no obligation.
Get a Free Quote →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. Named individuals in scenarios are entirely fictional and created for illustrative purposes only. Consider speaking to a qualified adviser before deciding what is right for you.
