Corporate Life Insurance in the UK: What It Is and How It Works
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Corporate life insurance in the UK is life cover that a company owns or pays for on the life of a director, shareholder or employee. It is a family of policies, not one product, and each pays a different person.
The main types are key person insurance, shareholder protection, business loan protection, group life insurance and relevant life insurance.
If you've come across the term in an American article, the UK picture is quite different. This guide explains what the term means here, who owns each policy and how the tax typically works. For a fuller comparison, see what business life insurance covers in the UK.
Key facts
- In the UK, the term covers a family of company-owned or company-paid life policies, not a single product.
- The main UK types are key person insurance, shareholder protection, business loan protection, group life insurance and relevant life insurance.
- A UK company can only insure a person's life where it has a genuine financial interest in that life, under the Life Assurance Act 1774, and insurers require the person's consent.
- Who receives the payout depends on the type: the company, the surviving shareholders or the family of the person covered.
What is corporate life insurance?
Corporate life insurance is a family of life policies that a UK company owns or pays for, rather than one product. The company insures the life of a director, shareholder or employee, and the policy pays out on death to the business, the other owners or the person's family, depending on its purpose.
You may also see it called a company life insurance policy or corporate-owned life insurance. Whatever the label, three questions define every policy: who owns it, who pays and who receives the payout. Our hub on company-owned life cover compares each type in full.
How does corporate life insurance in the UK differ from the US?
In the US, the term usually means corporate-owned life insurance (COLI), where a company insures employees and keeps the payout itself, often as a long-term funding tool for staff benefits. In the UK, the term covers a group of protection policies built around specific business risks, and several pay the family rather than the company. UK policies are typically term cover with no cash value, and American tax rules don't apply here.
UK law also limits who a company can insure. Under the Life Assurance Act 1774, a policy taken out by someone with no interest in the life insured is void. So a UK company needs a genuine financial interest in the person's life, and insurers ask for that person's consent before cover starts.
What types of company-owned life insurance are there in the UK?
There are five main company life insurance policies in the UK, each company-owned or company-paid: key person insurance, shareholder protection, business loan protection, group life insurance and relevant life insurance. The first three protect the business; the last two protect families.
Key person insurance
Key person insurance pays the company a lump sum if someone whose skills or relationships drive profits dies. The company owns the policy, pays the premiums and receives the payout, which could replace lost profits or fund a successor. See how key person insurance is usually sized and set up.
Shareholder protection
Shareholder protection gives the business or the surviving owners the money to buy a deceased shareholder's shares from their estate. It can be set up as a company share purchase, where the company owns cover on each shareholder and buys the shares back, or as own life policies written in trust for the other shareholders. See shareholder protection.
Business loan protection
Business loan protection is a business life insurance policy that pays off, or helps pay off, company borrowing if a director or key person dies. The company normally owns the policy and receives the payout to repay the lender.
Group life insurance
Group life insurance, or death in service, covers employees under one company scheme. If an employee dies in service, it typically pays a lump sum of two to four times salary, usually through a trust, to their family.
Relevant life insurance
Relevant life insurance is the company-paid policy that benefits the family rather than the business. The company owns a single policy on one director or employee, and the payout goes into a discretionary trust for their loved ones. Find out how relevant life works.
Who owns the policy and who gets paid?
For each company life insurance policy, the company usually owns or pays for the cover, but the payout can go to three different places: the company, the surviving shareholders or the family of the person covered. The table shows the usual position.
| Policy type | Who owns it | Who pays the premiums | Who receives the payout | Main purpose |
|---|---|---|---|---|
| Key person insurance | The company | The company | The company | Protect profits |
| Shareholder protection (company share purchase) | The company | The company | The company, to buy back shares | Keep control |
| Shareholder protection (own life in trust) | Each shareholder, in trust | The shareholder or the company | The surviving shareholders | Keep control |
| Business loan protection | Usually the company | The company | The company, to repay the lender | Clear debts |
| Group life insurance | The company, through a scheme trust | The company | The employee's family | Staff benefit |
| Relevant life insurance | The company, in trust | The company | The director or employee's family | Family protection |
| Source: Executive Life summary of typical UK arrangements, October 2026. | ||||
How is corporate life insurance taxed?
The tax treatment depends on the type of policy and why it is in place. Relevant life premiums are typically an allowable business expense, key person premiums may or may not be deductible, and company-paid shareholder protection for own life policies usually creates a benefit in kind charge. Everything depends on individual circumstances and current legislation, which can change.
For key person cover, HMRC's Business Income Manual (BIM45525) says premiums are normally deductible only where the sole purpose is to meet a loss of trading profit and the policy is term cover. If premiums are deducted, the payout is usually taxed as a trading receipt.
Relevant life policies are set out in HMRC's Employment Income Manual (EIM15045). Premiums are typically an allowable expense, subject to the wholly and exclusively rules, with no benefit in kind.
| Policy type | Premiums usually deductible? | Payout usually taxed? |
|---|---|---|
| Key person insurance | May be, if HMRC conditions are met | Yes, as a trading receipt if premiums were deducted |
| Shareholder protection (company paid, own life in trust) | Benefit in kind for the shareholder covered | Usually not taxed as income |
| Business loan protection | Depends on what the loan was used for | Depends on the premium treatment |
| Group life insurance (registered scheme) | Usually yes | Usually paid tax free through the scheme trust |
| Relevant life insurance | Typically yes | Usually paid tax free through the trust |
| Source: HMRC manuals BIM45525 and EIM15045, October 2026. General summary only. | ||
We cover each structure in our article on whether life insurance is a business expense.
Not sure which corporate life policies fit your business? Book a free, no-obligation call with Executive Life.
Frequently asked questions
What is corporate-owned life insurance?
Corporate-owned life insurance is life cover that a company owns on the life of a director, owner or employee, with the payout usually going to the company. In the UK, key person insurance and company share purchase cover are the most common examples. The company must have a genuine financial interest in the life insured.
What are the benefits of corporate life insurance?
Company-owned life cover can protect profits, repay business debts or fund the purchase of a deceased shareholder's shares if a key person dies. Some types, such as relevant life and group life, also protect employees' families. Depending on the policy and current legislation, premiums may also qualify for tax relief.
Can a company take out life insurance on an employee?
Yes. A UK company can take out life insurance on an employee with the employee's consent and where the company has a genuine financial interest in their life, such as the profits they generate. The Life Assurance Act 1774 makes a policy void where no such interest exists.
Is corporate life insurance the same as group life insurance?
No. Group life insurance is one type of company-owned life cover, providing death in service benefits for employees under a single scheme. The broader term also covers company-owned policies such as key person insurance, shareholder protection, business loan protection and relevant life insurance.
Who receives the payout from corporate life insurance?
It depends on the type of policy. Key person and business loan cover pay the company, shareholder protection pays the company or the surviving shareholders, and group life and relevant life pay the family of the person covered, usually through a trust.
Is a corporate life insurance policy a business expense?
A corporate life insurance policy may be a business expense, depending on the type and its purpose. Relevant life premiums are typically allowable, while key person premiums are deductible only if HMRC's conditions are met. Treatment depends on your circumstances and current legislation, so speak to a qualified adviser and your accountant.
Written by
Alex Ogden DipFA | Director | Executive Life
Alex Ogden DipFA holds the Level 4 Diploma for Financial Advisers (DipFA) awarded by the Walbrook Institute London, formerly known as the London Institute of Banking & Finance (LIBF). He is authorised by the FCA Ref: AJO01072.
Tax rates and thresholds are subject to change. This article will be updated following each HMRC Autumn Budget or Spring Statement where relevant thresholds change.
Executive Life is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 985058. Registered office: Unit 6, Birchy Cross Business Centre, Broad Lane, Solihull, West Midlands B94 5DN.
This article is for general information only and does not constitute financial advice. Tax treatment depends on individual circumstances and current legislation, which may change. Always speak to a qualified adviser before making financial decisions.