Death in Service vs Life Insurance: How Relevant Life Compares

Death in service vs life insurance comes down to scale: death in service covers a group of employees under one company scheme, while relevant life insurance gives one director or employee the same kind of cover individually.

Both are paid for by the company and pay a lump sum to the person's family. Death in service usually suits businesses with staff, and relevant life often suits director-only companies and higher earners. This guide compares the two side by side, including when it makes sense to have both.

Key facts

• Death in service is a group life scheme that covers employees under one company policy, usually for a multiple of salary such as two to four times.
• Relevant life insurance is an individual, company-paid life policy, often called an individual death in service plan.
• Relevant life cover is typically available up to 15 to 25 times total remuneration, depending on the insurer and age.
• Payouts from a registered death in service scheme count towards the Lump Sum and Death Benefit Allowance of £1,073,100.
• Group death in service cover usually ends when an employee leaves, while a relevant life policy can usually move with them.

What is the key difference between death in service and relevant life?

In the death in service vs life insurance comparison, the key difference is scale. Death in service covers a group of employees under one scheme, while relevant life insurance covers one person under their own policy. Both are owned and paid for by the company, both pay a lump sum to the family through a trust, and both are typically treated as an allowable expense with no benefit in kind.

In practice that changes who can get it, how much cover is available and what happens if the person leaves. Both are among the business life cover options open to a limited company.

What is death in service?

Death in service is an employee benefit that pays a lump sum to an employee's family if they die while employed by the business. It is provided through a group life scheme, usually for a multiple of salary. One policy covers everyone eligible, and most members don't need medical underwriting up to the scheme's free cover limit.

Most schemes are registered under pension scheme rules, although some use an excepted group life policy instead.

What is relevant life insurance?

Relevant life insurance is a life policy for one director or employee that the company owns and pays for. The payout goes into a discretionary trust for the person's family, not to the business. It works like a personal death in service benefit, which is why it's sometimes called an individual death in service policy.

HMRC sets out the rules for these policies in its Employment Income Manual (EIM15045). Premiums are typically an allowable business expense with no benefit in kind charge, depending on individual circumstances and current legislation.

For eligibility, cover limits and how the trust works, see our page on relevant life insurance.

Death in service vs relevant life: how do they compare?

When comparing death in service vs relevant life, the clearest differences are who they cover, how much cover is available, underwriting, tax and portability. Group death in service is built for teams. Relevant life is built for one person and often allows higher cover. The table sets out each feature row by row.

The government has also confirmed that from 6 April 2027, death in service benefits from registered schemes are excluded when unused pension funds are brought into inheritance tax.

The detailed payroll and pensions position is in our guide to death in service benefit tax.

When does death in service make sense?

Death in service usually makes sense when your business has a team of employees and you want one benefit that covers everyone on the same basis. It is simple to run, most staff join without medical questions, and it can help with recruitment and retention. The trade-off is lower cover per person and no portability.

• You have staff: enough eligible employees to meet an insurer's minimum.
• You want simplicity: one policy and one renewal each year.
• Cover needs are moderate: two to four times salary meets most employees' expectations.

When does relevant life make sense?

Relevant life usually makes sense for director-only companies, higher earners and anyone who needs more cover than a group scheme's free cover limit or salary multiple allows. Because it is an individual policy, the cover level is set for that person, and the policy can usually move with them if they change employer.

• Too small for a group scheme: see our guide to group life insurance minimum employees.
• Higher earners: cover sits outside the Lump Sum and Death Benefit Allowance.
• Directors who want portability: the policy isn't tied to one scheme.

Can you have both death in service and relevant life?

Yes, you can have both. It isn't always a choice of relevant life vs group life: many businesses run a group death in service scheme for staff and arrange relevant life policies for directors who need higher cover. The two sit side by side, and the right mix depends on your headcount, earnings and existing pension savings. A qualified adviser can help you structure it.

For example, a company with eight staff might give everyone three times salary through a group scheme, while the two directors each take out a relevant life policy for a larger sum. Read about every type of business life cover to see how the pieces fit together.

Do employees still need personal life insurance?

When weighing death in service vs life insurance you own personally, remember that employees with death in service may still want their own cover. Death in service usually ends when someone leaves their job, and a payout of two to four times salary may not cover a mortgage and family costs. Personal cover can fill the gap, but whether it's needed depends on each person's circumstances.

Weighing up death in service and relevant life for your business? Book a free call with Executive Life and we'll compare both for you.

Frequently asked questions

Is relevant life the same as death in service?

Relevant life insurance works in a similar way to death in service but covers one person instead of a group. The company pays, and the payout goes to the family through a trust. That's why relevant life is sometimes called an individual death in service plan.

Do I need life insurance if I have death in service?

Possibly. In death in service vs life insurance you own yourself, the main gap is portability: death in service usually ends when you leave your job and may not cover all your needs, such as a large mortgage. Whether you need personal life insurance as well depends on your circumstances, so it's worth speaking to a qualified adviser.

Can a company offer both group life and relevant life?

Yes. A company can offer group life cover for staff and relevant life insurance for directors who need higher cover. Many small businesses use both.

Which is more tax-efficient, death in service or relevant life?

Death in service and relevant life are both typically treated as allowable expenses for the employer and not as a benefit in kind for the employee. The more suitable choice depends on numbers, cover levels and individual circumstances, and on current legislation, which can change.

Can I take relevant life cover with me if I leave the company?

A relevant life policy can usually be transferred to a new employer if they agree to take it on, so cover doesn't have to stop. Death in service cover from a group scheme normally ends when you leave. Check the policy terms with your adviser.

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.