Director Life Insurance

Helping you protect all the things you work hard for...

Drewberry™ provide pensions, investment and insurance advice for Money to the Masses readers throughout the UK.

 

Why Director Life Insurance?

 

The most tax efficient life cover available for Directors is formally known as Relevant Life Insurance.

 

A policy which is owned and paid for by your company providing your family with a tax free cash lump sum should you pass away.

 

It benefits from the same tax position as Death in Service being allowable as a business expense and any claim being paid tax-free.

 
What is it for?
 

What Does Relevant Life Insurance Cover?

It works the same way as any other form of life cover, it is just significantly more tax-efficient. In the event of your death, your loved ones receive a tax-free cash lump sum to help ease any financial difficulties that might arise should you pass away

Can I Include Critical Illness Cover?

The short answer is no. The tax benefits of Relevant Life Insurance extend only to life cover, not to Critical Illness Cover so we tend to recommend looking at serious illness protection as a separate policy

For a policy that will pay out if you become too ill to work rather than pass away, you may want to consider Income Protection for Company Directors which is a more comprehensive form of sickness protection than Critical Illness Insurance.

What does it cover?
 

How Does Director Life Insurance Work?

The policy is underwritten on the life of the Company Director. However – and this is where the tax savings come in – it’s owned and paid for by your limited company.

Director Life Insurance isn’t a taxable benefit in kind, while premiums are typically a tax-deductible business expense. Moreover, you save on both employer and employee National Insurance contributions.

Savings of up to 55% can be made with Director Life Insurance when compared to taking out the same cover from post tax income.

You’ll need to set up a Relevant Life Trust alongside you policy, which your adviser will help you with. This ensures the benefit is paid tax-free to your loved ones.

How does it work?
 

Do I Need Life Insurance?

Many company directors have moved from an employed role to set up their own limited company. This may have meant giving up a number of employee benefits, such as Death in Service Cover.

Whether employed or a director your family is at the same risk of you passing away and your financial dependants will still require protection.

According to our Life Expectancy Calculator, the risks of a healthy man passing away in the next 10 years are as follows:

Age 30

Age 40

Age 50

1 in 85

1 in 43

1 in 19

Do I need cover?
 

How can we help?

We help company directors up and down the country and across industries to get the most appropriate Life Insurance, so are well-positioned to help you, your family and your company get the cover that you need.

Victoria Slade explains the purpose of Keyman Insurance

Relevant Life Insurance is more complex than regular Life Insurance as there are a lot of boxes that need to be ticked to make sure you’re fully compliant with the tax regime.

For help and advice, don’t hesitate to get in touch. You can reach us any time on 02084327333.

Victoria Slade
Business Protection Expert at Drewberry

Can we help?
Compare Top 10 UK
 Protection
Insurers
 
Takes approx. 60 seconds
Type of Policy
Level of Cover
Date of Birth
Loading your options...
Thank you for using our Quote Tool
If you need some help, just call us!
T: 02084327333
Our in-house Experts are here to provide FREE impartial advice!
Our Experts can answer all your questions
Our Experts can send you more appropriate options based on your personal circumstances

Very important if you are either Self-Employed or a Company Director.

Our online quote tool is good but our Experts are better

Oue Experts have access to far more insurers and can often find a better deal offline.

Saves you time, let our Experts do what they are best at
 

This Guide

Andrew Jenkinson - Drewberry
Written by:
Michael Englefield
Content Manager at Drewberry
⏰  8 min read
 

What is Directors’ Life Insurance?

Director Life Insurance typically comes in the form of Relevant Life Insurance. This is an incredibly tax-efficient way of providing Life Insurance for your family if you’re the director of your own limited company.

Just like regular Life Insurance, Relevant Life Cover pays out a tax-free cash lump sum to your loved ones if you pass away.

It’s very similar to Death in Service Cover, an employee benefit that many companies offer their workers. Similarities include the fact that it’s owned and paid for by the company (in this case, your own limited company) for the benefit of the worker (you).

The benefit is also paid into a trust, just as with Death in Service Cover, to ensure tax-efficient distribution of the payout to your loved ones should the worst happen.

Director Life Insurance offers significant tax savings over paying for a policy personally, with the premiums allowable as a business expense and any claim being paid out tax-free.

Need Help? Start Live Chat with our Experts  

Neil
Pensions Advice

Robert
Income Protection
 

Can I Get Directors’ Life Insurance?

Group Life Insurance is a popular employee benefit for companies to offer their staff, but for the smallest companies in the UK it simply isn’t viable. Here, Relevant Life Insurance can step in where there are too few employees for Group Life Insurance, this includes companies as small as those with only a single Director.

The key thing with Relevant Life Insurance is that there must be a company structure to own and pay for the policy.

sam barr-worsfold, independent protection expert at drewberry

Not everyone who works for themselves does so through their own limited company. For instance, the UK has an army of sole traders who operate as self-employed individuals without forming a limited company.

Unfortunately, without a company structure to own and pay for Directors’ Life Insurance, this type of cover isn’t available for the self-employed. However, it’s perfectly possible to get Life Insurance on a personal basis if you work in this way and we’re more than happy to advise you in this area.

Sam Barr-Worsfold
Independent Protection Protection Expert at Drewberry

Back to Top

Victoria swiftly helped in finding a solution which offered the required cover, with a more competitive premium.

Doug Harvey
05/09/2018
 

Do I Need Life Insurance?

No one wants to think about it, but it’s something all responsible adults with financial dependants should consider.

  • What would happen to your loved ones if you suddenly weren’t around anymore?
  • Could they keep up with the mortgage/rent without your income?
  • How would they meet everyday expenses, such as bills, groceries or even school fees?
How would your family cope without life insurance if you passed away?

If the answer is that you don’t know or that your family would likely struggle, Life Insurance is a way to offer both you and your loved ones valuable peace of mind.

Your family can receive a tax-free lump sum to repay any  outstanding debts and keep up with daily living expenses without your income.

 

Why Life Insurance?

According to the 2016 claims statistics of LV, one of Britain’s biggest Life Insurance providers:

  • The average age for a Life Insurance claim for both men and women was 61
  • The youngest claimant was just 23 years old
  • Average policy age at the point of claim was only 8 years.(1)

15.5% of deaths in England and Wales in 2016 occurred in people under the age of 65 according to the Office for National Statistics, with cancer being the biggest killer.(2)

Back to Top

1. https://www.lv.com/adviser/claims/claims-performance
2. https://goo.gl/X22866

Life Expectancy Calculator

Your Current Age
  years  
Risk of Death in next
  years  
Gender
verisign seal
We have designed this calculator using data from the Office for National Statistics to help you understand the risk of death during the term of your mortgage. Simply enter your details to find out...

Your Life Expectancy Results

 

Director Life Insurance Tax Savings

You can use the Relevant Life Insurance Calculator below to work out how much you as an individual can save on Directors’ Life Cover, but below are some example tax savings for a higher-rate taxpayer whose remuneration is primarily made up of dividends

Personal Life Cover

Director Life Cover

Cost to an Individual

Premium

£100.00

£0.00

Employee National Insurance

£0.00

£0.00

Dividend Tax

£48.15

£0.00

Cost to a Business

Premium

£0.00

£100.00

Employer National Insurance

£0.00

£0.00

Gross Cost

£148.15

£100.00

Corporation Tax

+£34.75

-£19.00

Total Cost
£182.90
£81.00

In the above table, there’s a 55.7% difference between the monthly cost of Life Insurance as an individual and the cost of Relevant Life Insurance paid for through the company.

This assumes the individual is a higher rate taxpayer and remunerates themselves primarily in dividends. Use the calculator below to work out the potential tax savings for your personal circumstances.

Victoria Slade
Business Protection Expert at Drewberry

Back to Top

 

Relevant Life Insurance Calculator

Calculate the tax savings you can make by choosing to take out Relevant Life Insurance and have your business pay the premiums instead of setting up a personal Life Insurance policy.
1
Your Monthly Premium
£
2
Is the premium paid from dividends ?
3
Your Highest Rate of Income Tax Your Highest Rate of Dividend Tax

Some assumptions have been made as to the relevant tax rates, please update accordingly if you are taxed at an alternative rate.

Corporation Tax Rate
Employer National Insurance Rate
Employee National Insurance Rate
4
Your First Name
5
Email Address Enter your email address for your summary report and our exclusive 'Directors guide to tax efficient insurance products' e-guide.
Required Field

Without agreeing to our terms and conditions and privacy policy we are unable to process your calculation and provide you with any results.

Your Relevant Life Tax Savings

Personal Life Cover
Relevant Life Cover
Cost to Individual
Premium
£0.00
Employee National Insurance
£0.00
IncomeDividend Tax
£0.00
Cost to Business
Premium
£0.00
Employer National Insurance
£0.00
Gross Cost
Corporation Tax
− 
Total Cost

By opting for Relevant Life Insurance over Personal Life Cover you would make savings of .

That is a saving of per month or per year.

victoriasladeportraitround

These calculators help but sometimes it doesn't beat talking to a human. If you need any support please do not hesitate to pop us a call on 01273646484.

Victoria Slade
Business Protection Expert at Drewberry

IMPORTANT NOTES

The tax treatment of Relevant Life Cover is based on the policy being wholly and exclusively for the purpose of trade. Cover can be offered to an employee as part of that employee’s remuneration package, which is competitive relative to what they could attract in the open market. The purpose of providing such a scheme must not be primarily to avoid tax.

Speaking to an expert adviser is highly recommended before entering into this type of arrangement to ensure the plan is set up correctly and you aren't falling foul of any tax rules. The team at Drewberry is here to help – just pop us a call on 01273646484.

 

Key Policy Options

Choose an amount of cover

This is how much the insurer will pay out if you pass away. It can be up to 25 times your remuneration, including salary, dividends, pension contributions etc.

Your Director Life Insurance options

How much would your family need to survive if you could no longer provide for them? Consider debts that need to be repaid any any expenses you’d have to meet for your children until they reached adulthood.

Length of cover

This is how long you’d like the policy to run. Relevant Life Insurance typically has a maximum age of 70, but it’s common for people to set the cease age of the policy simply to a point where their family would no longer be financially dependent and debts would be repaid.

Level or decreasing cover?

Directors’ Life Insurance usually provides a level benefit, but there is one insurer who will offer decreasing cover, where the benefit falls over time if you anticipate the needs of your loved ones to fall over time.

Relevant Life and Critical Illness Insurance

Can I Include Critical Illness Cover?

victoria slade, independent protection expert at drewberry

We do not recommend including Critical Illness Cover with Relevant Life Insurance. This is because the tax status of the combined product has not been signed off by HMRC and there may be significant tax complications should a claim arise.

If you’re concerned about not being able to earn due to your health, you may want to consider a separate Directors’ Income Protection policy. This can also be owned and paid for by your business.

Victoria Slade
Business Protection Expert at Drewberry

Back to Top

Get advice on life insurance for company directors

Expert Life Insurance Advice for Directors

When you’re looking for Life Insurance for Company Directors, it’s important you get advice. Not only can a truly independent expert, such as one of the team at Drewberry, get quotes from the entire UK market to find you the best Life Insurance deal, but they also know exactly how this product works and how it should be set-up.

Our advisers are here to help you through a number of complications surrounding including the Relevant Life Trust that must be set up alongside such a policy to prevent any claim being paid back into the business and make sure it reaches your beneficiaries free from tax.

Tom Conner, director at Drewberry

If you’re looking for Life Insurance as a Company Director, getting independent advice is the best place to start. We can talk you through the best options and explain the way the tax position works to get you the best life cover for you, your business and your family.

Don’t hesitate to call us today on 02084327333 for expert, independent advice.

Tom Conner
Director at Drewberry

Back to Top

Compare Top 10 UK
 Protection
Insurers
 
Takes approx. 60 seconds
Type of Policy
Level of Cover
Date of Birth
Loading your options...
Thank you for using our Quote Tool
If you need some help, just call us!
T: 02084327333
Our in-house Experts are here to provide FREE impartial advice!
Our Experts can answer all your questions
Our Experts can send you more appropriate options based on your personal circumstances

Very important if you are either Self-Employed or a Company Director.

Our online quote tool is good but our Experts are better

Oue Experts have access to far more insurers and can often find a better deal offline.

Saves you time, let our Experts do what they are best at

Frequently Asked Life Insurance Questions

 
We have recently taking out joint life insurance off the back of our first mortgage, should this be...
 
I’m getting quotes for life insurance and don’t know if skiing is included in the cover and...
 
I have two young children and want to get life insurance in place to ensure that they are ok should I...
 
I frequently go gliding as a hobby, i’m looking to get life insurance as a cushion for my family...