Relevant Life Insurance for Contractors: How It Works Through Your Limited Company
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Can you get relevant life insurance as a contractor? Yes, if you work through your own limited company. Relevant life insurance lets your company pay for your personal life cover. The premiums can qualify for corporation tax relief, and the payout goes to your family through a trust. In our illustration below, cover that needs £207.52 of company income to fund personally costs your company £75.00 as relevant life.
Most contractors don't get death-in-service cover the way permanent employees do. You are the employer, so if you want that safety net, you have to build it yourself. This article covers who qualifies, how relevant life works through a personal service company, the tax position, IR35 and what happens between contracts. For the wider picture, see our complete guide to relevant life for directors.
Key facts: relevant life insurance for contractors
- Relevant life insurance is a company-paid, single-person death-in-service policy, available in the UK since 6 April 2006.
- Relevant life premiums can qualify for corporation tax relief and don't create a benefit-in-kind charge for the person covered.
- Relevant life premiums don't count towards your pension annual allowance.
- Umbrella company workers and sole traders usually can't take out relevant life cover, because they have no limited company of their own as an employer.
- Relevant life cover is typically capped at 15 to 25 times total remuneration, depending on the insurer and your age.
- A relevant life policy pays out through a trust, which normally keeps the money outside your estate for inheritance tax.
What is relevant life insurance for contractors?
Relevant life insurance for contractors is a company-paid life insurance policy for contractors who work through their own limited company. The company pays the premiums, which can qualify for corporation tax relief where HMRC's wholly and exclusively test is met, and the payout goes to your family through a trust.
Relevant life insurance pays a tax-free lump sum if you die during the policy term, and most policies also pay out on a terminal illness diagnosis. HMRC recognises relevant life policies under its employer-financed retirement benefits guidance, which is why the tax treatment differs so much from a personal policy.
Can contractors get relevant life cover?
Yes, if you work through your own limited company. Umbrella workers and sole traders usually can't. Relevant life insurance needs an employer to own and pay for the policy, and an employee to cover. A contractor running a personal service company is both, which makes relevant life a natural fit for IT contractors, engineers and consultants.
Own limited company contractors
If you're a director of your own limited company and on the company payroll, the company can normally take out relevant life cover on you. That applies whether you're the sole director or run the company with your spouse. Some insurers ask for more than one employee, so it's worth checking eligibility before you apply.
If your spouse is genuinely employed by the company, they can have a separate policy of their own. Can my spouse be covered on a relevant life policy? explains how that works.
Umbrella company workers and sole traders
If you work through an umbrella company, the umbrella is your employer, not you. You don't control its benefits, so you can't set up relevant life cover through it. GOV.UK's umbrella company guidance explains how that employment relationship works. Sole traders have no separate employer at all, so personal life insurance is usually the route.
| How you contract | Relevant life available? | Why |
|---|---|---|
| Own limited company, on payroll | Usually yes | Your company is the employer and pays the premiums |
| Umbrella company | Usually no | The umbrella is the employer and you don't control its benefits |
| Sole trader | No | There is no separate employer to own the policy |
| Own limited company, inside IR35 contracts | Check with an adviser | Your company still employs you, but IR35 can change how the company is funded |
Eligibility is set by each insurer. Some require at least one employee in addition to the director.
How does relevant life work through your limited company?
Relevant life insurance works in five steps, and once it's set up there's very little for you to manage.
- Your company applies for a relevant life policy, with you as the person insured.
- The policy is written into a relevant life trust from day one, with trustees you choose.
- Your company pays the premiums each month from its business account.
- If you die during the term, the insurer pays the sum assured to the trustees.
- The trustees pay the money to your family or other chosen beneficiaries.
Because the relevant life payout goes to the trustees rather than your estate, your family can normally receive it without waiting for probate.
What are the tax advantages for contractors?
Relevant life insurance can cost much less than personal cover for contractors, because the company pays the premiums from pre-tax profit. A personal policy is paid from money that has already faced corporation tax and then dividend tax. For a higher-rate taxpayer in 2026/27, that means 25% corporation tax followed by 35.75% dividend tax.
Relevant life premiums also don't create a benefit-in-kind charge for you as the employee. Is relevant life insurance a benefit in kind? explains why.
Personal route vs relevant life: an illustration
| Monthly figures, higher-rate taxpayer | Personal policy | Relevant life |
|---|---|---|
| Premium | £100.00 | £100.00 |
| Corporation tax (25%) | £51.88 | n/a |
| Dividend tax (35.75%) | £55.64 | n/a |
| Corporation tax relief on premium (25%) | n/a | £25.00 saved |
| True monthly cost | £207.52 | £75.00 |
| Difference per month | £132.52 | |
| Difference over a 25-year term | £39,756 |
Illustrative only. Assumes 25% corporation tax (main rate) and 35.75% higher-rate dividend tax, 2026/27. The personal policy figure is the gross company income needed to pay a £100 premium from dividends. The relevant life figure is the net cost to the company after corporation tax relief. The 25-year figure is £132.52 a month over 300 months. Your figures depend on your profits, tax band and circumstances.
If your company pays the 19% small profits rate, the relief is lower and the net cost of a £100 relevant life premium is £81. The corporation tax rate that applies depends on your profits, so check with your accountant.
For the full calculation across different tax bands, see relevant life insurance tax benefits explained.
Does relevant life use your pension allowance?
No. Relevant life premiums don't count towards your pension annual allowance, which is £60,000 for most people. Many contractors already use large employer pension contributions to draw profit tax-efficiently, so relevant life lets you add life cover without eating into that allowance. GOV.UK's annual allowance guidance explains the limits, including the tapered allowance for higher earners.
Does IR35 affect relevant life insurance?
IR35 doesn't change what relevant life insurance is, but it can change your company's finances. If a contract falls inside IR35, the way your income from that contract is taxed changes, which can affect how your company is funded and how much profit it has left to pay premiums. GOV.UK's off-payroll working guidance sets out how the rules work.
IR35 status may also affect how relevant life premiums are treated, so check your position with an adviser and your accountant before you set up cover. We'll look at your contract mix with you, and your accountant can confirm the treatment for your company.
How much relevant life cover can a contractor get?
Insurers set a maximum relevant life sum assured as a multiple of your remuneration, typically between 15 and 25 times, reducing as you get older. For contractors the key question is what counts as remuneration. Some insurers take dividends into account alongside salary, while others limit or exclude them, and the rules vary from insurer to insurer.
| Remuneration the insurer counts | Total | At 15x | At 25x |
|---|---|---|---|
| Salary only | £12,570 | £188,550 | £314,250 |
| Salary plus £50,000 dividends | £62,570 | £938,550 | £1,564,250 |
Illustrative only, based on a contractor taking a £12,570 salary and £50,000 of dividends. Maximum multiples vary by insurer and reduce with age.
That gap is why it pays to check how each insurer treats dividends before you apply. Speak to a relevant life specialist and we'll check the options for your income mix.
What happens between contracts, if you go permanent or close your company?
A gap between contracts doesn't usually affect relevant life cover, as long as your company keeps paying the premiums and you remain its employee. Going permanent or closing the company is different. Depending on the insurer, the relevant life policy may transfer to a new employer, convert to a personal policy, or end.
| Situation | What typically happens |
|---|---|
| Gap between contracts | Cover normally continues while the company keeps paying premiums |
| Going permanent | A new employer may be able to take over the policy; otherwise it may end or, with some insurers, convert to personal cover |
| Closing your company | The policy may be transferred or converted, depending on the insurer. Corporation tax relief stops once no company is paying |
Options depend on the insurer and policy terms. Check before you change role or close your company.
Speak to us before you close your company or accept a permanent role, so you don't lose cover that could be harder or more expensive to replace later.
Relevant life vs personal life insurance for contractors
Relevant life insurance usually costs less for limited company contractors, while personal life insurance offers more flexibility. Here's how the two compare, one feature per row.
| Feature | Relevant life | Personal life insurance |
|---|---|---|
| Who pays | Your limited company | You, from personal income |
| Tax relief on premiums | Can qualify for corporation tax relief | None |
| Benefit-in-kind charge | None | Not applicable |
| Uses pension annual allowance | No | No |
| Inside your estate for IHT | No, paid through a relevant life trust | Can be, unless written in trust |
| Critical illness option | No | Can usually be added |
| Portability | May transfer or convert, depending on the insurer | Stays with you whatever your work |
| Mortgage assignment | Can't be assigned to a lender | Can be assigned to a lender |
General comparison. Policy features vary by insurer.
What doesn't relevant life insurance cover?
Relevant life insurance is life cover only. A relevant life policy can't include critical illness cover, can't be assigned to a mortgage lender, and isn't designed to protect business debts or fund a share buyout.
- Critical illness: you'll need separate personal cover if you want a payout on diagnosis of a serious illness.
- Mortgages: the policy can't be assigned to a lender, but your family can use the payout to clear a mortgage.
- Business debts and buyouts: business loan protection, key person insurance or shareholder protection are built for these.
- Lost income if you can't work: executive income protection can cover up to 80% of your salary and dividends combined, compared with typically 60% for personal income protection.
If relevant life looks like the right fit, we can arrange relevant life insurance through your company and handle the application for you.
Frequently Asked Questions
Can I get relevant life cover through an umbrella company?
Usually not through your own arrangement, because the umbrella company is your employer and you don't control it. Some umbrella companies offer their own benefits, but relevant life is normally set up by contractors who run their own limited company.
Is relevant life insurance worth it for a contractor?
For many limited company contractors it can be, because the company pays the premiums and they can qualify for corporation tax relief. Whether it suits you depends on your cover needs, profits and IR35 position, so it's worth speaking to an adviser.
Does relevant life insurance count towards my pension allowance?
No. Relevant life premiums don't use your pension annual allowance, which can matter if your company already makes large pension contributions for you. Tax treatment depends on your circumstances and current legislation.
What happens to my relevant life policy if I go permanent?
It depends on the insurer and your situation. In some cases a new employer can take over the policy; otherwise it may end. An adviser can check your options before you close your company or change role.
Can my spouse be covered if they work for my company?
Yes, if your spouse is genuinely employed by the company, the company can usually take out a separate relevant life policy for them. Each policy covers one person.
Last reviewed: October 2026. Next review: April 2027. 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.
This article is for information purposes only and does not constitute financial advice. Tax treatment depends on individual circumstances and may be subject to change. Always seek professional advice before making financial decisions.
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), the FCA's benchmark qualification for retail investment advisers. He is authorised by the FCA, Ref: AJO01072. View the FCA register entry.
Executive Life is authorised and regulated by the Financial Conduct Authority (FRN 985058).