Life Insurance for Company Directors: Your Options Compared
No pressure, no jargon. A short call to work out whether this cover fits your business.
Life insurance for company directors comes in six main forms: personal cover, relevant life, death in service, key person insurance, shareholder protection and whole of life. Some protect your family, others protect the business.
The right mix depends on your situation. This guide sets the options side by side, explains who each one pays and how it's typically taxed, then matches them to common director situations.
Key facts
- Life insurance for company directors can be arranged personally, through the company for the family's benefit, or through the company for the business's benefit.
- Relevant life insurance is paid for by the company and pays out to the director's family through a trust, with premiums typically an allowable business expense.
- Shareholder protection gives surviving owners the money to buy a deceased director's shares, usually backed by a cross-option agreement.
- UK inheritance tax is charged at 40% on estates above the £325,000 nil-rate band, which is why some directors add whole of life cover.
What life insurance options do company directors have?
When arranging life insurance for company directors, the options are personal life insurance, relevant life insurance, death in service, key person insurance, shareholder protection and whole of life cover. The key distinction is who benefits. Personal cover, relevant life and death in service protect your family, while key person cover and shareholder protection protect the business and its owners.
A company-paid policy isn't automatically a policy for your family. For a wider overview, see our guide to the life cover your company can provide.
| Option | Who pays | Who receives the payout | Typical tax treatment of premiums* |
|---|---|---|---|
| Personal life insurance | You, from taxed income | Your family, often via a trust | No tax relief |
| Relevant life insurance | Company | Your family, via a relevant life trust | Usually an allowable expense; no benefit in kind |
| Death in service (group scheme) | Company | Your family, via the scheme trust | Usually an allowable expense for a registered scheme |
| Key person insurance | Company | Company | May be allowable, depending on purpose and the key person |
| Shareholder protection | Each shareholder, or the company | Surviving shareholders, or the company for a share buyback | If the company pays for own-life cover, usually a benefit in kind |
| Whole of life cover | You, personally | Your beneficiaries, often to meet an IHT bill | No tax relief |
| *Illustrative summary based on 2026/27 rules. Tax treatment depends on individual circumstances and current legislation, which can change. | |||
Option 1: Personal life insurance
Personal life insurance is a policy you own and pay for yourself, out of salary or dividends you've already paid tax on. It stays with you whatever happens to the company, and the payout can go into a trust for your family. The downside for a director is cost, because there's no tax relief.
To fund a £100 premium from dividends, a higher-rate taxpayer pays 35.75% dividend tax in 2026/27, on top of the corporation tax the company has already paid on those profits.
Option 2: Relevant life insurance
Relevant life insurance is life cover that your company owns and pays for, with the payout going to your family through a trust. Premiums are typically an allowable business expense and not a benefit in kind, so it's often more tax-efficient than a personal policy. It's director life cover paid by the company, but it's still for your family.
As an illustration, a £100 monthly personal policy needs £207.52 of gross company income for a higher-rate taxpayer, while the same premium through relevant life needs £100.00 of pre-tax profit and costs the company £75.00 after 25% corporation tax relief. This is an illustration only, and your figures will differ.
We walk through the full calculation in can my limited company pay for my life insurance? Relevant life is life cover only, and you must be an employee, which includes a director on the payroll.
For eligibility, cover limits and trusts in depth, read our complete guide to relevant life for directors.
Option 3: Death in service through a group scheme
Death in service is life cover for employees under one company group life scheme. If you or a team member dies while employed, the scheme typically pays a multiple of salary, commonly two to four times, through a trust to the family. Premiums for a registered scheme are usually an allowable expense for the company.
Death in service suits directors who want to cover the whole team, although insurers often set a minimum number of members. For the trade-offs, see death in service vs relevant life insurance.
Option 4: Key person insurance
Key person insurance is cover the company owns on a director or employee whose loss would hit profits. The company pays the premiums and receives the payout, which can fund lost profits, recruitment or debt repayment. It protects the business, not your family, so it doesn't replace personal or relevant life cover.
Whether key person premiums are tax deductible depends mainly on why the cover is in place and whether it's simple term cover, following HMRC's Business Income Manual (BIM45525). If premiums are deducted, the payout is usually taxable as a trading receipt.
Our page on key person cover explains how businesses usually work out the amount.
Option 5: Shareholder protection
Shareholder protection gives the surviving owners money to buy a deceased director's shares, so control stays with the people running the business and the family receives cash instead. It's usually paired with a cross-option agreement, which gives both sides a binding option to buy and sell the shares after a death.
It can be arranged as own-life policies written in trust for the other shareholders, or as company share buyback cover owned by the company. If the company pays for own-life-in-trust cover, it usually creates a benefit-in-kind charge for the shareholder covered. Read how shareholder protection works in practice.
Option 6: Whole of life cover for inheritance tax
Whole of life cover pays out whenever you die, rather than within a set term. Directors with larger estates often use it to help their family pay an inheritance tax bill. It's a personal policy, usually written in trust so the payout may fall outside your estate. Find out more about whole of life cover.
Inheritance tax is generally charged at 40% on the part of an estate above the £325,000 nil-rate band, depending on your circumstances and current legislation.
Which option suits your situation?
The right life insurance for company directors depends on who relies on you: your family, your co-owners, your team or your lenders. The table below matches common situations to options worth discussing with an adviser. There is no single company director life insurance policy that suits everyone, so treat it as a starting point, not a recommendation.
| Your situation | Options to consider | Why |
|---|---|---|
| Sole director with a family | Relevant life; personal cover | Protects your family, with relevant life typically paid from pre-tax profits |
| Two or more shareholder-directors | Shareholder protection; relevant life | Keeps ownership with the survivors and gives each family a payout |
| Director with key staff | Key person cover; death in service | Protects profits if someone vital dies and gives staff a valued benefit |
| Director with business loans or personal guarantees | Key person or loan cover; personal cover | Helps clear company debts so a guarantee doesn't fall on your family |
| Director with an inheritance tax concern | Whole of life in trust | Can help your family pay an IHT bill without selling assets |
| General guidance only. The right mix depends on your circumstances; speak to a qualified adviser. | ||
Can directors combine more than one policy?
Yes, company directors can hold more than one type of life insurance, and many do. Each policy does a different job, so combining life insurance for company directors can protect your family and business together. Insurers apply overall limits to the total cover on one life.
- Relevant life with shareholder protection: your family gets a payout, and your co-owners can buy your shares.
- Relevant life with key person cover: your family is protected, and the company can absorb the loss of profits.
- Personal cover with relevant life: some directors keep an existing personal policy and add relevant life on top.
- Whole of life with any of the above: term cover protects income, while whole of life helps with inheritance tax.
For how business life insurance for directors fits together, our business life insurance hub is a good next step.
Not sure which combination suits you? Book a free call with Executive Life and we'll map out your options.
Frequently asked questions
Can a company pay life insurance for a director?
Yes. A company can pay life insurance for a director, and the most common route is a relevant life policy, which pays out to the director's family through a trust. Read can my limited company pay for my life insurance? for how it works and what it could cost.
What is the most tax-efficient life insurance for a company director?
For family protection, relevant life insurance is often more tax-efficient for a company director than a personal policy, because premiums are typically an allowable business expense with no benefit in kind. Whether it suits you depends on your circumstances and current legislation, which can change.
Is directors' life insurance a benefit in kind?
Relevant life insurance is not normally a benefit in kind for the director covered. A personal policy paid for by the company usually is, so income tax and National Insurance are due. For each policy type, see is life insurance a business expense?
Do I need key person cover if I already have relevant life?
Key person cover and relevant life do different jobs. Relevant life protects your family by paying into a trust for them. Key person cover pays the company, to help it cope with lost profits or debts. Many directors with key roles in their business hold both.
Can a director have relevant life and personal life insurance at the same time?
Yes. A director can hold relevant life and personal life insurance at the same time, and many do. Insurers apply overall limits to the total cover on one person, so the amount of relevant life available may take existing personal cover into account.
Can a sole director get life insurance through their company?
Yes. A sole director on the company payroll can usually take out relevant life insurance, because they count as an employee. Some insurers apply extra conditions for sole directors, and key person or shareholder protection may matter less if you're the only owner. Speak to an adviser about what's available to you.
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.