Calculate savings from a Relevant Life Policy vs personal life insurance. Compare corporation tax relief, National Insurance savings, and net premium cost.
A Relevant Life Policy (RLP) is an employer-paid, single-life, death-in-service insurance policy. It pays a lump sum to the employee's family or dependants if the employee dies while employed. Unlike a group life scheme, an RLP can cover a single person — making it ideal for company directors and key employees in small businesses.
Premiums paid by the employer are treated as a business expense and qualify for corporation tax relief. Crucially, the premiums are not treated as a P11D benefit in kind for the employee, so there is no income tax or National Insurance on the premiums. The death benefit is paid free of income tax and typically outside the deceased's estate (held in trust), so no inheritance tax.
RLPs can be set up for employees and directors of a limited company. They cannot be used by sole traders or partners in a traditional partnership. The policy must be written in trust for the employee's family or dependants. HMRC requires the scheme meets the definition of a 'relevant life policy' under ITTOIA 2005.
There is no HMRC-specified maximum sum assured, but insurers typically cap cover at 25–35× the employee's annual remuneration (salary + dividends). The cover must be a pure death-in-service benefit — no investment element, no critical illness (as a stand-alone policy), and no cashback on maturity.
For a higher-rate taxpaying director, an RLP is almost always more cost-effective than personal life insurance. The combined saving from corporation tax relief and no NI on premiums can mean the effective cost is 40–60% less than paying for personal cover from net salary. Most financial advisers recommend RLPs for owner-managed business directors.