Contractor Life Insurance

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Aimed at those who have set up a limited company, Contractor Life Insurance – known in the industry as Relevant Life Cover – is a tax-efficient way for contractors to provide a lump sum death benefit to their families.

  • The cover is owned and paid for by your limited company, offering significant tax savings on premiums over a policy paid for personally.
  • Premiums are typically a tax-deductible business expense (subject to approval from your local inspectorate of taxes).
  • Ideal for replacing employee benefits, such as Death in Service Cover, that you may have lost by starting up your own limited company.
  • You typically insure yourself for a multiple of remuneration – up to 25 times total remuneration is permitted by certain insurers.
  • On death, the payout is distributed into a special trust created at the outset of the policy (something Drewberry helps facilitate), avoiding any inheritance tax implications on the benefit.

What Does It Cover?

Life Insurance for contractors is designed only to cover the individual’s death while the policy is in force. You can choose a policy term and you will be covered if you pass away during that term.

In most cases it does not (and cannot, for tax reasons) have any attached form of illness insurance, such as Critical Illness Cover.

For this, you’d have to buy a separate policy, such as Executive Income Protection. This would also be owned and paid for by your business and is designed to pay out a monthly income if you were too ill or injured to do your job role.

Can I Take Out Contractor Life Cover?

Relevant Life Insurance is aimed at small businesses, especially those with a solo director, but also including those with a very small number of employees.

Such companies are typically not eligible for a Group Life Insurance scheme thanks to insufficient staff numbers.

Working for an umbrella company?

Some contractors work for an umbrella company, which acts as an employer for those on fixed-term contracts. They pay invoices, make PAYE deductions and may offset expenses.

In this case if you have not formed a limited company, we recommend straightforward personal Life Insurance as you’re not typically eligible for the tax benefits of Relevant Life Cover.

Sole trader?

Some contractors merely register for self-employment without forming a limited company, particularly in the early days when they may be earning less. Sole traders should also take out personal life insurance as, without the limited company structure, they are not eligible for Contractor Life Insurance either.

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Do I Need Contractor Life Insurance?

While in an employed role, many of us can rely on employee benefits – at least to some extent – to provide protection should the worst happen.

Death in Service schemes provide Life Insurance for employees in large groups; Contractor Life Insurance is very similar, just on a much smaller scale.

When you move into a new role as the director of your own limited company, you lose any employee benefits you may previously have enjoyed. That’s where Contractor Life Insurance can step in.

If you have a family or outstanding liabilities you would want taken care of after you pass away, a Life Insurance policy is an integral part of ensuring this is taken care of.

What’s the Risk of Passing Away?

We’ve taken the example of three healthy men of various ages and calculated the risk of them passing away during the next 15 years using the below Life Expectancy Calculator.

Their risk of death is as follows:

Age 30

Age 40

Age 50

1 in 47

1 in 23

1 in 10

Life Expectancy Calculator

A bit morbid we know, but this tool works out the risk of you passing away based on ONS Life Expectancy Data

  • years
  • years

How Much Does Contractor Life Insurance Cost?

Relevant Life Insurance can offer significant savings over personal Life Insurance because the premiums are paid for by the business.

Tax liabilities vary depending upon a significant number of factors, including your personal circumstances.

While contractors should seek advice from an accountant on the specific taxation issues relating to their business, in general terms Contractor Life Insurance:

  • Is not classed as a taxable benefit in kind
  • Is paid for by the business and treatable as a tax deductible business expense
  • Is excluded from both employee and employer National Insurance calculations
  • Has a payout that does not form part of your lifetime pension allowance, unlike most group schemes.

Given these factors, Contractor Life Insurance is typically a notably cheaper option than personal cover.

The cost of cover is based on the same underlying issues as for all Life Insurance, including:

  • Your age
    The older we are the more likely we are to pass away during the life of the policy and so the more expensive premiums will be
  • Your medical history
    Insurers may ‘load’ (increase) premiums based on any pre-existing medical conditions you might have
  • Your smoker status
    Smokers are more likely to die prematurely, and so are charged more in Life Insurance premiums
  • The amount of cover
    The more you look to cover yourself for, the more premiums will cost
  • Length of policy / policy term
    Similar to your age, the older you will be at the end of the policy the greater the risk of you passing away during the policy’s term, which will be reflected in higher premiums.

HMRC, Contractor Life Insurance and Tax

As mentioned, there are significant tax savings to be made on Relevant Life Insurance compared with personal Life Insurance.

These savings are HMRC-approved, providing the primary purpose of the policy is not seen as tax evasion. This is something you’d need to discuss with your accountant, but in the vast majority of cases Relevant Life Insurance is completely HMRC-approved.

Example tax savings on Relevant Life Insurance are laid out in the table below.

Personal Life Cover
Relevant Life Cover
Cost to Individual
Monthly Premium
Employee NI Contribution
Income Tax
Cost to Business
Employer NI Contributions
Gross Cost
Corporation Tax
Total Cost
Total Savings


By opting for Relevant Life Insurance over personal Life Cover you would make savings of 49.03%. That is a saving of £77.93 per month or £935.13 per year.

Relevant Life Insurance Calculator

Calculate the tax savings you can make by taking out a company paid Relevant Life Insurance policy instead of a personal Life Insurance policy.

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Compare Best UK Contractor Life Insurance Companies



Aegon was founded as Scottish Equitable in 1831. Dutch insurer Aegon N.V. bought a 40% stake in Scottish Equitable in 1994 and became a 100% stakeholder in 1998.

Maximum Cover:

  • Up to age 35: 30 x remuneration
  • Age 36-50: 25 x remuneration
  • Age 51-60: 20 x remuneration
  • Age 61+: 15 x remuneration
  • No financial evidence required for sums less than £2,500,000
legal & general

Legal & General

In 2015, Legal & General won the ‘Life Insurance Provider of the year’ award from the Personal Touch Awards.

Maximum Cover:

  • Age 18-49: 25 x remuneration
  • Age 50-59: 20 x remuneration
  • Age 60-73: 15 x remuneration
  • No financial evidence required for sums less than £3,500,000

royal london

Royal London

Royal London began as a friendly society in 1861, later changing to a mutual society in 1908. Today, Royal London is now the UK’s largest mutual life, pensions and investment company.

Maximum Cover

  • 30 x remuneration for clients aged under 40 years
  • 25 x remuneration for clients aged 40-49 years
  • 20 x remuneration for clients aged 50-59 years
  • 15 x remuneration for clients aged 60 years+

scottish widows

Scottish Widows

Scottish Widows is a highly praised provider of pension and insurance products across the UK with nearly 6 million customers.

Maximum Cover:

  • Level Term: £25 million
  • Increasing Term: £15 million (at point of policy inception, increases permitted to £30 million)


Zurich owns locations in more than 170 countries and provides insurance products and services on a global scale.

Maximum Cover:

  • Age 16-39: 30 x total remuneration
  • Age 40-49: 20 x total remuneration
  • 50+ : 15 x total remuneration

Common Contractor Life Insurance Questions

  • Can my limited company pay for my Life Insurance?

    Yes, your limited company can pay for your Life Insurance via a product known as Relevant Life Insurance. This is a HMRC-approved Life Insurance that offers notable tax savings over paying for cover personally.

    Premiums are eligible for National Insurance and corporation tax relief, while thanks to a specially-drafted trust the payout is also free from tax should you pass away during the term of the policy.

  • What does HMRC say about Relevant Life Insurance?

    HMRC is very clear about the tax position of Relevant Life Insurance providing a number of conditions are met under section 393(4) of the Income Tax (Earnings and Pensions) Act 2003.

    • It must be considered an excepted life policy as defined in section 480 of the Income Tax (Trading and Other Income) Act 2005
    • The policy can only provide life cover and cannot provide any other benefit, such as Income Protection or Critical Illness Insurance
    • The employee can only be covered up to the age of 75 and it can only pay out a lump sum if the employee dies before this age
    • There must be no surrender value on the policy, which means it can only be a term insurance policy
    • The beneficiaries can only be individuals or charities
    • The main purpose of the policy must not be to avoid tax.
  • Who owns a Contractor Life Insurance policy?

    While the policy is taken out on the life of you as an individual, and must be underwritten on an individual basis, unlike personal Life Insurance it’s your company that owns and pays for the policy. It is this fact that offers the maximum tax efficiency.

    The payout is paid into an appropriate trust, which keeps it separate from the business and your estate in the event of a claim.

  • What's the difference between Keyman Insurance and Contractor Life Insurance?

    Both Keyman Insurance and Contractor Life Insurance provide life cover for key people within the business. However, the purpose of the two policies is very different.

    Perhaps the biggest difference between Keyman Insurance and Relevant Life Insurance is the beneficiary of the policy. Keyman Insurance benefits the business; Relevant Life Insurance, by its nature to retain its tax-efficient status, can only benefit individuals (or charities).

    If you take out Key Person Cover, you’ll be providing business continuity to your company should you pass away or become critically ill. The lump sum payout will go into the business to be used however is appropriate to make up for losing you as a key individual, such as compensating for lost profits, hiring a replacement etc.

    Keyman Cover can also be used to pay out a small sum to wind up the business in the event of a key individual’s death or to repay a corporate loan.

    Contractor Life Insurance, on the other hand, is designed for your beneficiaries, paying out a tax-free cash lump sum to help financially at a very difficult time.

  • Can Sole Traders Get Relevant Life Insurance?

    Unfortunately, unless you have a company structure set up to own and pay for the policy, you won’t be able to get Relevant Life Insurance as a self-employed sole trader and would need to consider a personal Life Insurance policy instead.

  • Are Relevant Life Insurance policies a P11D Benefit in Kind?

    No, Relevant Life Insurance policies are not considered a P11D or benefit in kind for you as a contractor. This means there’s no additional tax to pay as a result of you having the policy.

Get Contractor Life Insurance Quotes & Expert Advice

Drewberry understands contractors and the way you work – we deal with people working this way day in, day out.

We’re also a fully independent insurance adviser and are not tied to any one insurer, meaning we can search the entire UK market to find you the best deal.

Why Speak to Us…

We started Drewberry because we were tired of being treated like a number and not getting the service we all deserve when it comes to things as important as protecting our health and our finances. Below are just a few reasons why it makes sense to let us help.

  • There is no fee for our service
  • We are independent and impartial
    Drewberry isn’t tied to any insurance company, so we can provide completely impartial advice to make sure you get the most appropriate policy based solely on your needs.
  • We’ve got bargaining power on our side
    This allows us to negotiate better premiums for you than you going direct yourself.
  • You’ll speak to a dedicated expert from start to finish
    You will speak to a named expert with a direct telephone and email. No more automated machines and no more being sent from pillar to post – you’ll have someone to speak to who knows you.
  • Benefit from our 5-star service
    We pride ourselves on providing a 5-star service, as can be seen from our 3635 and growing independent client reviews rating us at 4.92 / 5.
  • Gain the protection of regulated advice
    You are protected. Where we provide a regulated advice service we are responsible for the policy we set-up for you. Doing it yourself or going direct to an insurer won’t provide this protection, so you won’t benefit from these securities.
  • Claims support when you need it the most
    You have support should you need to make a claim. The most important thing when it comes to insurance is that claims are paid and quickly. We are here to support you during the claims process and make sure it’s as smooth and stress free as possible.
Tom Conner Director at Drewberry

As a contractor there are lots of things to consider when it comes to your financial protection and doing it in the most tax efficient manner.

For help please don’t hesitate to pop us a call on 02084327333 or email

Tom Conner
Director at Drewberry

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Drewberry Ltd is registered in England and Wales. Companies House No. 06675912

Drewberry Ltd registered office: Telecom House, Preston Road, Brighton, England, BN1 6AF. Telephone 0208 432 7333

Drewberry Ltd (Financial Conduct Authority No. 505473) is an Appointed Representative of Quilter Wealth Limited and Quilter Mortgage Planning

Limited, which are authorised and regulated by the Financial Conduct Authority.