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Business life insurance, by who it pays

Business life insurance is the life cover a business pays for to keep itself, its owners and its people's families secure.

There are four kinds, and each pays someone different: key person insurance pays the business, relevant life pays a director's or employee's family, shareholder protection pays the surviving owners, and group life pays staff families.

Every claim here is our summary of a named external source, linked beside it. Sources change: check the wording at the link before you rely on it.

Who needs the money? ↓See the four covers →
01 · Key facts

Business life insurance: key facts

Six points that hold across every kind of business life cover.

Each is our summary of a named source, linked beside it.

Business protection insurance →
  1. Key person cover is owned and paid for by the employer, so any payout goes to the employer (Legal & General ↗).
  2. A relevant life plan is paid for by the employer and pays benefits through a trust to the employee's family (Royal London ↗).
  3. A cross option agreement gives surviving shareholders the option to buy the shares from the personal representatives (Royal London ↗).
  4. Death in service pays a tax-free cash sum to an employee's family if they pass away while on the company payroll (Legal & General ↗).
  5. HMRC allows key person premiums as a deduction only if the sole purpose is meeting a loss of trading income (HMRC ↗).
  6. Aviva sells one business policy, life or life and critical illness, to limited companies, LLPs, partners and sole traders (Aviva ↗).
02 · What it is

What is business life insurance? Four payees

Business life insurance is an umbrella term, not a single policy.

The four policies under it can all sit on the same person's life.

What separates them is who owns the policy and who receives the payout.

Pick who would need the money and the card shows the policy built for that job, with the insurers' and HMRC's words linked beside each point.

What is key person insurance? →Key person vs relevant life →

Who would need the money?

Pays the business

Key person insurance

Key person insurance explained →
03 · The covers

Four covers, and one insurer's example

Each card links to our guide for that cover.

The line in orange says who the policy pays.

Who each pays, summarised from the insurers' own descriptions: key person (Legal & General ↗), relevant life (Royal London ↗), shareholder protection (Royal London ↗), death in service (Legal & General ↗), Aviva (Aviva ↗).

04 · One policy, several jobs

Aviva's business life insurance options

Some insurers sell one business life policy that can do more than one job, and Aviva publishes the details of its own (Aviva ↗).

We describe it as an example, not a recommendation.

What Aviva says it is

  • Life cover, or life and critical illness cover (Aviva ↗)
  • For limited companies, LLPs, individual partners and sole traders (Aviva ↗)

What Aviva says it is for

  • Key person: protecting the business against the financial consequences if a key person passes away (Aviva ↗)
  • Shareholder protection: if a shareholder or partner passes away (Aviva ↗)
  • Business loan: protecting the repayment of a mortgage or loan if a shareholder or partner passes away (Aviva ↗)
Aviva key person insurance →Legal & General →Zurich →Key person insurance comparison →
05 · Tax

Tax treatment of business life insurance

There is no single tax rule for business life insurance.

HMRC's conditions for key person premiums are strict: the sole purpose must be meeting a loss of trading income (HMRC ↗), and a life policy must be term insurance with no other benefits (HMRC ↗).

Whether that is met is a question of fact (HMRC ↗).

Relevant life has its own definition in the legislation (legislation.gov.uk ↗).

Group life cover that is not an excepted group life policy is within the chargeable event rules (HMRC ↗).

Check how each applies with your accountant.

Key person insurance tax →

Key person

Relevant life

Shareholder protection

Group life

Premiums
Deductible only if the sole purpose is trade (HMRC ↗) and, for life cover, it is term insurance with no other benefits (HMRC ↗)
Generally a business expense if paid wholly and exclusively for the business, in Royal London's view (Royal London ↗)
Depends on the structure: check with your accountant
No HMRC page we can cite: check with your accountant
Benefit in kind
Not the employee's policy: the company owns it (Royal London ↗)
Not a P11D benefit, says Royal London (Royal London ↗)
Depends on the structure: check with your accountant
Not a taxable benefit where the beneficiary is any individual or registered charity (HMRC ↗)
Payout
Trading income, where the premiums were deducted (HMRC ↗)
Outside the EFRBS charge (HMRC ↗); held in trust, not part of the employee's estate, says Royal London (Royal London ↗)
Business property relief still available under a cross option agreement, says Royal London (Royal London ↗)
Not usually subject to income tax or inheritance tax, says Legal & General (Legal & General ↗)
Swipe to compare
06 · Business or personal

Business life insurance vs personal life insurance

A personal policy is one you arrange and pay for yourself (Legal & General ↗), designed so your dependants are looked after if you pass away (MoneyHelper ↗).

Business life cover is paid for by the company, and who it pays depends on the policy.

The two overlap only for your family.

Relevant life pays your family, like a personal policy, but the company pays for it (Aviva ↗).

Key person cover never pays your family: it pays the business (Legal & General ↗).

Key person vs life insurance →

Business life cover

Personal life cover

Who is paid
The business, a family through a trust, or co-owners: it depends on the policy
Your dependants (MoneyHelper ↗)
Trust
Not needed for key person (Royal London ↗); relevant life is in trust from the start (Royal London ↗)
Can be written in trust, outside your estate (MoneyHelper ↗)
If you leave
Relevant life trustees can assign the plan to you as a personal plan (Royal London ↗)
It is your policy
Sole traders
Own-life premiums not deductible (HMRC ↗)
Death in service from a past job will have ended (MoneyHelper ↗)
Swipe to compare
07 · Arranging it

How to arrange business life insurance

Insurance is the last step.

Map who the business depends on, put a number on each gap, then match each gap to the cover built for it.

To insure someone as a key person, Legal & General says you need their agreement and a financial relationship with them (Legal & General ↗).

Relevant life must be written in trust for the employee's beneficiaries (Aviva ↗).

Before you buy, the FCA tells consumers to check the firm on its Firm Checker (FCA ↗).

Key person insurance calculator →Key person risk →Sole traders →
01

Map

Find who the business depends on

Founders, directors, key sales and technical people, and anyone a lender relies on.

02

Match

Match each gap to a policy

Business loss: key person. Family: relevant life. Shares: shareholder protection. Staff: group life.

03

Size

Put a number on each gap

Earnings, profit and loan methods, with the multiples insurers publish.

04

Trust

Set up the trusts

Relevant life is written in trust, and so is an own-life shareholder plan. Key person cover needs none.

05

Check

Use an authorised firm

Check the broker or adviser on the FCA Firm Checker before you buy.

08 · UK figures

Business life insurance: UK market data

We print only figures a named source publishes: the Association of British Insurers and the insurers' own documents.

Each links to its source.

Group and individual protection claims paid, 2024£8bn

ABI and GRiD figures; check at the link (ABI ↗)

New individual protection claims paid, 202497.9%

ABI figure; check at the link (ABI ↗)

of businesses believe they would stop trading within a year of losing a key individual59%

Legal & General's own research, a belief survey, not a failure rate (Legal & General ↗)

Salary multiple most UK employers offer as death in service2–4×

Legal & General's description; check at the link (Legal & General ↗)

09 · Sources

Check it for yourself

Every claim on this page is our summary of one of the documents listed here.

We last checked them against the live sources on 28 September 2026.

The documents are the authority, not this page.

Insurers and HMRC update them, so validate any figure or condition at its link before you rely on it.

Questions

Business life insurance, answered

Business life insurance is a name for the life cover a business pays for.

It covers four main policies: key person insurance, which pays the business; relevant life cover, which pays a director’s or employee’s family through a trust; shareholder protection, which funds the surviving owners buying a shareholder’s stake; and group life, which pays a lump sum to an employee’s family under a death in service scheme.

It depends on the policy.

HMRC allows key person premiums as a deduction only if the sole purpose is meeting a loss of trading income and, for life cover, the policy is term insurance with no other benefits.

Royal London says relevant life premiums will generally be treated as a business expense if paid wholly and exclusively for the business.

Premiums a sole trader or partner pays for cover on themselves are not deductible.

Check your own position with your accountant. HMRC BIM45525 ↗

We do not publish prices, and we do not give quotes.

Each insurer sets the premium after assessing the person insured and the cover asked for, so the only reliable figure is one an insurer or an authorised broker gives you.

Our cost guide explains what the price depends on. Key person insurance cost guide ↗

Start with who would need the money.

If the business would lose profit, that is key person cover.

If a director’s family would need money, that is relevant life.

If co-owners would need to buy the shares, that is shareholder protection.

If you want to provide for staff families, that is group life.

Many businesses hold more than one.

An FCA-authorised adviser can tell you what suits your business.

Some policies, yes.

Aviva’s Business Life Insurance Options are available to sole traders as well as companies, LLPs and partners.

HMRC says premiums a sole trader pays for cover on their own life are not deductible.

Royal London says some insurers do not offer relevant life cover to sole traders or equity partners taxed under Schedule D. Aviva Business Life Insurance Options ↗

Beta · information only

Put a number on it, before you speak to anyone.

The key person insurance calculator works through the earnings, profit and loan methods, with the multiples UK insurers publish.

01Earnings, profit and loan methods

02Insurers’ published multiples, with sources

03No email, no quote, no sales call

Information, not advice

We are not an insurer, broker or regulated adviser, and we do not give quotes or recommend a policy. For regulated advice, use an adviser authorised by the FCA.

Open the calculator →

Takes you to the key person insurance calculator.

Not financial advice. This page is general information. Before buying insurance, the FCA tells consumers to check the firm on its Firm Checker (FCA ↗). For free guidance, see MoneyHelper.