In 2025, more company directors are taking a closer look at the way they and their employees are insured. Rising premiums, shifting tax thresholds, and the growing popularity of limited company structures have all prompted one important question:

Is a standard Death in Service scheme still the best option — or is Relevant Life Insurance now the smarter choice?

Both types of cover aim to provide a lump sum if an employee dies while working for the business. Yet beyond that headline similarity, they differ significantly in structure, tax treatment, and flexibility — particularly for small business owners and directors.

At Willow Private Finance, we regularly advise clients who’ve been paying into corporate life schemes for years, unaware that a more efficient and personalised alternative exists. This article explores the crucial differences between Death in Service and Relevant Life Insurance, helping you decide which fits your business and financial goals in 2025.

For a deeper breakdown of how small businesses can use these policies, see our recent guides:

Relevant Life Insurance for Small Business Directors: 2025 Planning Essentials and The Tax Benefits of Relevant Life Insurance for Business Owners.

The 2025 Market Context

Corporate protection is evolving fast. As economic uncertainty lingers and HMRC continues tightening its view on business expenses, directors are looking for ways to offer meaningful employee benefits that don’t erode profitability.

Historically, most companies relied on Death in Service — a group life policy that provides a multiple of an employee’s salary (typically three to four times) if they die during employment. But these group schemes were designed for large employers, with high minimum staff numbers and uniform benefit structures.

Today, many firms no longer fit that model. The UK’s business landscape is now dominated by limited companies with just one or two directors. These small employers often don’t qualify for traditional group life schemes, or find them needlessly rigid.

Meanwhile, Relevant Life Insurance — once a niche concept — has become mainstream among limited companies, thanks to its ability to deliver death-in-service-style benefits on an individual, tax-efficient basis.

The choice between the two isn’t just about coverage; it’s about financial strategy, tax optimisation, and control.

Understanding Death in Service Schemes

A Death in Service policy is typically arranged by an employer to provide life cover for a group of employees under one master policy.

If an employee dies while employed by the company, the scheme pays out a multiple of their salary to their nominated beneficiaries. The benefit is funded by the employer, and while there’s usually no income tax on the payout itself, the cost structure can be inefficient for small firms.

These policies are not portable — meaning if the employee leaves the company, their cover ends. The level of benefit is also tied to salary, which can disadvantage directors who take minimal PAYE income and rely on dividends instead.

For larger organisations, Death in Service remains a simple way to provide consistent cover for many employees. But for directors, contractors, and small company owners, its limitations are increasingly clear.

Understanding Relevant Life Insurance

Relevant Life Insurance was created to fill those gaps. It provides similar protection — a lump sum on death or terminal illness — but is set up individually and funded by the company on behalf of each director or employee.

Unlike group schemes, it doesn’t require a minimum number of staff. Each policy is written into its own trust, ensuring the payout goes directly to the employee’s chosen beneficiaries and remains outside their estate for inheritance tax.

The company pays the premiums, which are typically corporation tax-deductible as an allowable business expense. For the director, there’s no benefit-in-kind charge, and no income tax or National Insurance to pay.

This structure gives business owners something that group life can’t: full tax efficiency, portability, and control.

If the director leaves the company or retires, the policy can often be transferred to a new employer or converted into personal cover — a flexibility most group schemes lack.

Key Differences Between Relevant Life and Death in Service

Though the outcomes sound similar — a lump-sum payout on death — the two products work in fundamentally different ways.

A Death in Service scheme is a group policy. It’s uniform, convenient, but inflexible. Cover is tied to employment, based on salary, and funded through a pooled plan controlled by the employer. The cost to the company can be higher, and smaller firms may find themselves excluded altogether.

Relevant Life, on the other hand, is a personalised corporate policy. Each individual has their own plan, held in trust, funded directly by the business. The premiums are often deductible, and the cover is bespoke — not just a salary multiple.

For directors taking low PAYE income but high dividends, that distinction is crucial. Death in Service might only pay three times a £20,000 salary — just £60,000. A Relevant Life plan could instead be structured to pay £1 million or more, based on overall financial need, not just salary.

The difference isn’t theoretical; it’s transformational.

Tax Efficiency in 2025

From a tax perspective, Relevant Life remains one of the most advantageous protection products on the market.

Premiums are paid by the company, treated as a business expense, and reduce taxable profits. There’s no income tax or National Insurance for the director, and the benefit, being held in a trust, is free from inheritance tax.

Death in Service, by contrast, is not always tax-deductible for small employers. In many group schemes, premiums may not qualify as an allowable expense if the company doesn’t meet HMRC’s “wholly and exclusively for business purposes” rule.

Additionally, payouts from group schemes are often processed through a master trust controlled by the insurer, which can slow down access for beneficiaries compared to a bespoke Relevant Life trust.

In essence, Relevant Life delivers the same benefit — but with sharper tax efficiency, faster payout potential, and greater autonomy for the business owner.

Who Benefits Most from Each

Death in Service continues to work well for large organisations with multiple employees and standardised benefits. It’s simple to manage at scale and provides predictable coverage.

Relevant Life, by contrast, was built for smaller businesses — limited companies, family firms, consultants, and directors who employ few or no staff. It’s ideal for high earners whose remuneration mixes salary and dividends, as the policy isn’t capped by PAYE earnings.

For directors seeking to extract value tax-efficiently from their companies while protecting their families, Relevant Life is often the clear winner.

At Willow Private Finance, we see this most often among professional service directors — lawyers, accountants, and consultants — who appreciate precision over convenience.

Practical Scenarios

Imagine two business owners with identical life cover goals — both want £500,000 protection for their families.

Director A joins a Death in Service scheme through their company. The cover is capped at four times their £40,000 salary, meaning only £160,000 of benefit. The company also can’t deduct the premium in full, and the director loses cover if they leave.

Director B arranges a Relevant Life policy through their limited company. The cover is set at £500,000, aligned with family needs, not salary. The company pays the premiums, deducts them against corporation tax, and the payout is held in trust for their spouse — tax-free and portable.

Same goal, completely different outcome.

This is why directors who understand the numbers are shifting toward Relevant Life as a smarter, longer-term solution in 2025.

Outlook for 2025 and Beyond

The protection market in 2025 is shaped by two major trends: personalisation and tax optimisation. Employers want flexibility; directors want efficiency.

As HMRC continues to refine guidance on business-funded benefits, Relevant Life’s compliant, transparent structure positions it as the natural evolution of death-in-service cover for small businesses.

Meanwhile, group schemes will likely remain dominant among large employers — but for directors of SMEs and family-run firms, the case for Relevant Life is overwhelming. It’s not just about cover; it’s about using your company intelligently to secure your family’s financial future.

How Willow Private Finance Can Help

At Willow Private Finance, we work with directors and business owners to build protection strategies that are personal, compliant, and efficient. Whether you’re reviewing an existing Death in Service scheme or exploring a switch to Relevant Life, we’ll help you evaluate the numbers, structure the trust, and liaise with your accountant to confirm tax treatment.

Our role is simple: to ensure your protection plan delivers maximum value — not just peace of mind, but measurable financial efficiency.

Frequently Asked Questions

Q1: Is Relevant Life cheaper than Death in Service?
A: Often, yes — particularly for small businesses. Relevant Life premiums are usually tax-deductible, making them more cost-effective than group cover.

Q2: Can I replace my Death in Service with a Relevant Life policy?
A: In many cases, yes. Willow can help structure a compliant transfer or standalone policy that replicates or exceeds your previous cover.

Q3: Does Relevant Life cover critical illness?
A: No, it covers death or terminal illness only. Critical illness can be arranged separately if needed.

Q4: What happens if I change jobs or close my company?
A: You can often transfer the policy to a new employer or convert it into a personal plan, maintaining continuous protection.

Q5: Is there a minimum number of employees needed for Relevant Life?
A: No. Even a single director of a limited company can qualify — one of the key advantages over group schemes.



📞 Want Help Navigating Today’s Market?

Book a free strategy call with one of our mortgage and protection specialists.

We’ll help you find the smartest way forward—whatever rates or tax rules do next.