For many company directors and high earners, traditional life insurance is not the most efficient way to secure cover. Premiums are paid from post-tax income, which means you’re effectively paying more than the policy’s headline cost once income tax and National Insurance are factored in.

Relevant Life Insurance provides a smarter alternative. It allows limited companies to take out life insurance on behalf of directors or employees, with the business paying the premiums. The result is cover that provides the same protection as a personal policy but in a highly tax-efficient structure.

In 2025, as more entrepreneurs look to balance personal and corporate wealth strategies, Relevant Life has become one of the most effective ways to combine protection with savings. At Willow Private Finance, we see it as a tool that bridges personal security and business planning.

How Relevant Life Insurance Works

A Relevant Life policy is taken out by the business, not the individual. The company pays the premiums, but the cover is written into trust for the benefit of the employee’s family or chosen beneficiaries.

If the insured person dies (or in some cases is diagnosed with a terminal illness), the policy pays out a lump sum to the beneficiaries. Because the cover is held in trust, the payout is usually free from income tax, corporation tax, and inheritance tax.

For directors and high earners, this structure offers a clear advantage: personal life cover, funded through the business, at a lower effective cost.

The Tax Benefits in 2025

The appeal of Relevant Life is as much about tax efficiency as protection.

• For the business: Premiums are usually treated as an allowable business expense, reducing corporation tax.
• For the individual: Premiums are not treated as a benefit-in-kind, so they don’t increase personal tax liability.
• For the beneficiaries: The payout is typically free of inheritance tax if the policy is written into trust.

The combined effect is that Relevant Life can be significantly cheaper than a comparable personal policy. For high earners, where additional income tax and NI rates bite harder, the savings can be substantial.

Who Can Benefit from Relevant Life Insurance?

Relevant Life is particularly valuable for:

• Company directors of small limited companies who want life cover but don’t have access to a group scheme.
• High earners who want to avoid the tax inefficiencies of paying premiums from personal income.
• SMEs that want to offer valuable protection to directors or key employees without setting up a full group policy.
• Entrepreneurs with families, who want to combine personal security with corporate tax efficiency.

For many of our clients, the attraction is that Relevant Life protects both their loved ones and their wealth planning — without unnecessary tax leakage.

How Relevant Life Fits Into Wider Planning

Relevant Life is not just about insurance — it’s about integration. For directors with property portfolios, it sits alongside strategies such as UK Buy-to-Let Investments. For high-net-worth clients, it complements whole of life policies for inheritance tax planning.

It also works seamlessly with other forms of business protection. A company might use business loan protection to safeguard borrowing, key person cover to protect revenues, and Relevant Life to look after directors’ families. Together, these create a rounded, tax-efficient protection structure.

A Practical Example

Consider a limited company director earning £100,000 a year. They want £1 million of life cover. If they take out a personal policy, they must pay premiums from post-tax income, meaning the real cost is inflated by income tax and NI.

With Relevant Life, however, the company pays the premiums directly. The cost is reduced by corporation tax relief, and there is no benefit-in-kind charge. The director’s family still receives the full £1 million payout if the worst happens — but at a much lower effective cost.

Why Relevant Life Matters in 2025

This year, more than ever, directors and business owners are looking for efficiency. With corporation tax higher and personal tax thresholds frozen, every pound matters. Relevant Life provides a way to protect your family while also running your finances smarter.

It’s particularly compelling for directors who want the reassurance of cover without undermining other tax-efficient strategies, such as pension contributions or property investments.

How Willow Can Help

At Willow Private Finance, we specialise in working with directors, entrepreneurs, and high-net-worth individuals to integrate protection into broader financial strategies. With Relevant Life, that means ensuring you get not only the right level of cover but also the right structure for maximum tax efficiency.

Because we are whole of market, we compare policies across providers to secure the most competitive solutions. We also work closely with your accountants and advisers where needed, ensuring your protection aligns with your tax and wealth planning.

Frequently Asked Questions

What is Relevant Life Insurance (RLI) and who is it for?
An employer-owned, individually underwritten life policy for an employee or director, paying a lump sum on death (and often terminal illness). It’s a tax-efficient alternative to personal life cover or a full group scheme—ideal for directors and high earners.

Why is Relevant Life considered tax-efficient in 2025?
Premiums are usually paid by the company and can be deductible if they meet the “wholly and exclusively” test. Benefits are typically not a P11D perk, no employee NI is due, and proceeds are paid via trust—often outside the estate for IHT efficiency. (Tax treatment depends on circumstances; take advice.)

Who isn’t eligible for Relevant Life—and what are the alternatives?
It’s generally not available to sole traders, equity partners or most LLP members (as they’re not employees). Alternatives include personal life cover, Key Person cover, Shareholder/Partnership protection, or Excepted Group Life for wider teams.

How much can I insure and for how long?
Sums assured are based on multiples of remuneration and provider maxima. Terms are flexible (level or indexed benefits; decreasing options for mortgages) up to typical cease ages set by the insurer, subject to medical and financial underwriting.

Does a Relevant Life policy need a trust?
Yes—RLI is normally set up under a discretionary trust at outset. This speeds claims, directs benefits to chosen beneficiaries, and can keep proceeds outside the estate. Appoint suitable trustees and keep beneficiary letters current.

Can Relevant Life include critical illness or income protection?
No—Relevant Life is life (and often terminal illness) cover only. Pair it with separate Critical Illness cover and, for sick-pay needs, Executive Income Protection.

What underwriting and evidence should directors expect?
Full medical disclosure (and possibly GP reports) plus financial checks to confirm remuneration/role. Companies provide employer details; higher sums may require nurse screenings or additional questionnaires.

What common pitfalls should businesses avoid?
Setting up RLI for non-employees, failing the “wholly and exclusively” test, neglecting the trust deed, under-insuring high earners, or letting cover lapse after promotions or remuneration changes. Review annually.

📞 Want Help Protecting What Matters Most?

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