Relevant life insurance vs. death in service
As a director, you’re always looking for ways to make smart financial decisions.
Choosing the right policy isn’t just about ticking a box; it’s about making a decision that benefits both you and your business.
Two of the most popular options are relevant life insurance and death in service. But which is the right fit for you?
If you’re a director of a small or medium-sized business, understanding the difference could save you money while giving you peace of mind.
Why relevant life insurance is a game-changer for directors
Imagine getting a life insurance policy that’s paid for by your company, reduces your corporation tax, and doesn’t count as a benefit-in-kind. Sounds good, right? That’s exactly what relevant life insurance offers.
This policy is designed specifically for directors and employees of limited companies who want life cover without the added cost and complexity of a group scheme.
The best part? Your business pays the premiums, and because it’s classed as an allowable expense, it’s tax-efficient. That means you could save up to 49% compared to a standard personal life insurance policy.
How it works
Your business sets up and pays for the policy.
If the insured person (you or an employee) passes away, the payout goes directly to their beneficiaries via a trust, completely tax-free.
Unlike standard life insurance, the premiums are not subject to national insurance or income tax.
Plus, if you leave the company, you can take the policy with you.
Who is it for?
- Directors looking for a tax-efficient way to protect their family.
- Small business owners who want to provide employee benefits without the cost of a full group scheme.
- High earners who want to avoid their life insurance policy counting towards their pension lifetime allowance.
How does death in service compare?
This benefit is a valuable employee perk, often included in larger corporate benefits packages. It offers employees a lump sum—usually a multiple of their salary—if they pass away while employed by the company.
It’s a great option for businesses that want to offer a competitive employee benefits package, but it’s not always the most flexible or cost-effective option for directors. Here’s why:
- It’s tied to employment – If you leave the company, the policy doesn’t follow you.
- It’s usually a group scheme – This means less flexibility for directors wanting tailored cover.
- It can impact pension allowances – The payout can count towards an employee’s pension lifetime allowance, which could lead to unexpected tax charges for high earners.
What’s better for directors?
If you’re a company director looking to maximise tax efficiency while securing a life insurance policy, relevant life insurance is the standout choice. Here are the top benefits:
- Save on tax – Premiums are tax-deductible, and there’s no National Insurance or Income Tax to pay.
- Retain flexibility – Unlike death in service, the policy moves with you if you leave the company.
- Protect your loved ones – A tax-free lump sum payout ensures financial security for your family.
- Save money – Up to 49% cheaper than paying for personal life insurance from post-tax income.
At its core, this is a smart, strategic money move. One that allows you to provide for your family while keeping more money in your business. A win-win.
Make the smart move today
Directors and employees alike can benefit from an HMRC-approved, tax-efficient life insurance policy that works in their favour.
It’s time to think differently about life insurance. Get the right protection for your family and your business—without overpaying.
