For many directors and business owners, personal financial protection used to mean one policy: life insurance. But in 2025, with rising costs, tighter tax treatment, and increasing uncertainty in both health and income stability, that view is changing rapidly.

Directors are no longer content to just protect their family in the event of death — they want to protect their income, their business, and their long-term financial independence.

That’s why the combination of Relevant Life Insurance and Executive Income Protection has become one of the most powerful, tax-efficient planning strategies available for company directors and high-earning professionals.

At Willow Private Finance, we help clients design protection portfolios that use company funds intelligently — creating a structure that safeguards both personal and professional wellbeing while optimising tax relief and compliance.

This article explores how these two policies complement one another, why directors are increasingly combining them in 2025, and how a joined-up approach delivers true peace of mind.

The Evolving Protection Landscape in 2025

The UK financial environment continues to evolve. Inflation has stabilised but remains above long-term averages, and corporate taxes have increased to 25% for many small and medium enterprises. At the same time, the cost of living and professional expenses are rising, making loss of income far more disruptive than ever before.

For directors, the challenge is twofold: they must ensure their family’s future is secure in the event of death or serious illness, and their lifestyle and commitments are protected if illness or injury stops them from working.

Traditional personal protection policies — such as standard life insurance or personal income protection — are often inefficient for limited company directors. Premiums are paid from post-tax income, benefits may not be tax-free, and they fail to utilise the advantages of corporate structures.

Relevant Life and Executive Income Protection resolve that inefficiency. When combined, they transform a company’s ability to provide bespoke, tax-efficient personal protection — paid for by the business, designed for the individual.

Understanding Relevant Life Insurance

Relevant Life Insurance is a life policy arranged and funded by a company, designed to pay a lump sum to an employee’s or director’s beneficiaries if they die or are diagnosed with a terminal illness.

Unlike personal life cover, the company pays the premiums, which are usually tax-deductible as a legitimate business expense. The benefit is not treated as a benefit-in-kind, and the payout — written into a discretionary trust — falls outside the estate, avoiding inheritance tax.

For directors, that means significant efficiency. Rather than paying for life cover personally (from post-tax income), the company funds the protection using pre-tax profits. The end result is often 40–50% cheaper in real terms compared to a personal policy, while providing the same or greater benefit.

It’s one of the few HMRC-approved methods of extracting value from the company for the director’s family, while meeting the “wholly and exclusively for business purposes” test.

However, life cover alone only addresses one risk — death. It doesn’t protect against the far more likely scenario: being unable to work due to illness or injury. That’s where Executive Income Protection becomes indispensable.

What Executive Income Protection Covers

Executive Income Protection (EIP) is a company-funded policy that replaces part of a director’s or employee’s income if they are unable to work due to illness or injury.

The business pays the premiums, which may also be tax-deductible, and the benefit is paid to the company if the insured person makes a claim. The company then continues to pay the director’s income — salary, dividends, or both — maintaining their lifestyle while they recover.

This structure ensures financial continuity for both the individual and the business. The company can plan around a defined replacement cost, while the insured person avoids the financial strain of reduced income.

Unlike personal income protection, which is capped and taxed, EIP can cover a higher proportion of total remuneration (including salary, benefits, and pension contributions). It’s especially valuable for high earners and directors with irregular income or dividend structures.

How the Two Work Together

Relevant Life Insurance and Executive Income Protection complement each other because they protect different financial timelines.

Relevant Life protects the long-term — ensuring that if a director dies, their family is financially secure.

Executive Income Protection protects the short and medium term — ensuring that if illness or injury prevents work, income and obligations continue to be met.

When combined, they create an unbroken line of security. In practical terms, this means that whether a director is temporarily unable to work or passes away unexpectedly, both their household and business remain stable.

The integration of these two policies also creates administrative simplicity. Both are funded by the company, often through the same insurer, and reviewed under a unified strategy. This reduces complexity, improves compliance, and ensures premiums are aligned with tax efficiency.

At Willow Private Finance, we build these structures to mirror the director’s full remuneration package, making sure both policies interact seamlessly with existing pension and shareholder arrangements.

Tax Efficiency and Compliance

Both policies are designed to meet HMRC’s definition of being “wholly and exclusively for business purposes,” provided they’re set up correctly.

For Relevant Life, the corporation tax deduction is typically straightforward, as the benefit is paid to dependants via trust. Executive Income Protection may also attract tax relief, although benefits are usually paid to the company and then distributed to the director as income, subject to normal taxation.

The tax benefit isn’t just about deductions — it’s about the efficiency of structure. Paying for protection through the company removes the double-tax impact of extracting dividends or salary to pay premiums personally.

For many directors, that alone results in an effective saving of 30–45% on protection costs over the life of the policy.

The Role in Business Continuity

The synergy between these two policies isn’t limited to personal finance. They also protect the business itself.

If a director becomes seriously ill, Executive Income Protection ensures the company can continue paying their income while avoiding financial strain on cashflow. This stability gives time to reorganise, delegate responsibilities, or recruit temporary leadership.

If the director dies, Relevant Life provides immediate liquidity to their family — preventing the need to extract funds from the company or disrupt trading operations.

In both scenarios, the business retains operational stability, the director’s dependants remain secure, and the company’s financial reputation is protected.

Common Misconceptions

Some directors mistakenly believe they must choose between Relevant Life and Executive Income Protection, or that one renders the other unnecessary. In reality, they address entirely different risks.

Another misconception is that these products are only suitable for large companies. In truth, they are ideal for single-director limited companies, contractors, and family-run firms. As long as the director is an employee of their company, both policies are available and fully compliant.

It’s also common to underestimate the value of income protection. Statistically, directors are far more likely to experience long-term illness than premature death. By combining both forms of cover, clients avoid the costly gap that comes from relying solely on life insurance.

A Director’s Perspective

Imagine a scenario where a company director pays themselves a modest salary and higher dividends. A serious illness prevents them from working for several months. Without income protection, their business cannot sustain regular dividend payments, and their household income collapses.

With Executive Income Protection, the company receives a monthly benefit to maintain their pay. If, in a more severe scenario, the director were to pass away, the Relevant Life payout ensures their family receives a tax-free lump sum, protecting both short-term stability and long-term security.

It’s this seamless coverage — from temporary illness to permanent loss — that makes the combination so effective.

The 2025 Outlook

In a market where personal taxation is rising and HMRC is tightening the definition of allowable expenses, company-funded protection has never been more relevant.

Directors are increasingly viewing these policies as part of their remuneration and risk management strategies rather than optional extras. Accountants, too, are recommending them as efficient, compliant methods of extracting corporate value for personal benefit.

As more professionals seek tailored, flexible structures, the pairing of Relevant Life and Executive Income Protection will continue to define best practice for director-level protection in 2025 and beyond.

How Willow Private Finance Can Help

At Willow Private Finance, we help directors and professionals combine Relevant Life and Executive Income Protection into cohesive, tax-efficient protection plans.

Our advisers work closely with accountants and insurers to ensure every policy is structured correctly — meeting HMRC guidelines while maximising value. We also review these policies regularly, adapting to changes in income, company profitability, and family needs.

Whether you’re an established company director, a consultant, or running a growing family business, Willow can help you protect both your life and your livelihood — all within one intelligent, compliant structure.

Frequently Asked Questions

Q1: Can a sole director take both Relevant Life and Executive Income Protection?
A: Yes. As long as you’re an employee of your limited company, both are available and can be combined.

Q2: Are both policies tax-deductible?
A: Usually. Relevant Life premiums are almost always deductible, and Executive Income Protection often qualifies if structured correctly.

Q3: Do the payouts overlap?
A: No. Relevant Life covers death or terminal illness; Executive Income Protection covers long-term illness or injury.

Q4: Can I choose different insurers?
A: Yes, but many directors prefer the same provider for ease of management and consistent underwriting.



Q5: How often should these policies be reviewed?
A: At least once a year or whenever income, company structure, or personal circumstances change.

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