Relevant Life vs Personal Life Insurance
A clear comparison for company directors — and why the difference matters.
The Core Difference
Both a Relevant Life Plan and a personal life insurance policy pay a lump sum if you die during the policy term. The cover itself is broadly the same. The difference is in who pays the premiums, how those premiums are taxed, and what happens to the payout.
For company directors, this difference can be significant — both in terms of the effective cost of cover and the inheritance tax treatment of the payout.
| Feature | Relevant Life Plan | Personal Life Insurance |
|---|---|---|
| Who pays premiums | Your limited company | You, from personal income |
| Corporation tax relief | May qualify, subject to HMRC rules | No |
| Income tax on premiums | No benefit-in-kind | Paid from post-tax income |
| National Insurance | No NI on premiums | Paid from post-NI income |
| Payout and inheritance tax | Via trust — outside your estate | May form part of your estate |
| Pension annual allowance | Does not count | Does not count |
| Maximum cover | Up to 25× total remuneration | Typically based on income multiples |
| Suitable for | Company directors and employees | Individuals |
Tax treatment depends on individual circumstances and HMRC rules, which may change.
Who Should Consider a Relevant Life Plan?
A Relevant Life Plan is worth considering if you are a director or employee of a limited company and you currently pay for personal life insurance from your own income. The potential tax advantages are most significant for higher-rate taxpayers and directors who take a combination of salary and dividends.
It is not suitable for sole traders or partnerships, as there is no company to pay the premiums.
The Inheritance Tax Advantage
A personal life insurance policy, if not written in trust, will form part of your estate on death and may be subject to inheritance tax at 40%. A Relevant Life Plan is written in a discretionary trust as a requirement of the structure — so the payout goes directly to your beneficiaries, outside your estate, without going through probate.
This is an important benefit even for directors who are not primarily motivated by tax efficiency.
When a Personal Policy May Still Be the Right Choice
A personal policy may be more appropriate if:
- You are not a director or employee of a limited company
- You want cover that is not tied to your employment
- You need a type of cover (such as whole of life) that is not available as a Relevant Life Plan
- Your company is not profitable and would not benefit from corporation tax relief
Not Sure Which Is Right for You?
We can compare both options for your specific situation — taking into account your tax position, remuneration structure, and protection needs. Whole of market, no broker fees.
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