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Company Life Insurance for EmployeesA Tax-Efficient Employee Benefit
Set up life insurance for your employees as a valuable, tax-efficient benefit. Compare group life schemes, relevant life policies and death-in-service cover.
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Book a Free ConsultationKey Facts: Company Life Insurance for Employees
Company life insurance for employees is one of the most valued workplace benefits in the UK, providing financial security for employees' families.
- -Employers can provide life insurance as a tax-efficient employee benefit
- -Relevant life insurance has no P11D charge — tax-free for the employee
- -Group life schemes typically pay 2-4x annual salary on death
- -No minimum employee numbers for relevant life (unlike group schemes)
- -Premiums are corporation tax deductible for the employer
- -81% of employees say life insurance is an important workplace benefit (ABI survey)
What Is Company Life Insurance for Employees?
Company life insurance for employees — also known as death-in-service benefit — pays a lump sum to an employee's family if they die while employed. It is one of the most popular and valued employee benefits in the UK.
According to the Association of British Insurers, over 13 million UK employees have some form of group life cover through their employer, but millions more — especially those in small businesses — have no cover at all.
UK employers have two main options for providing employee life insurance: group life schemes (for larger companies) and relevant life insurance (ideal for smaller companies). Both are tax-efficient, but they work differently.
Group Life Insurance
A single scheme covering all eligible employees. Usually requires 3-5 minimum employees. Pays a fixed multiple of salary (typically 2-4x). Part of the pension scheme so subject to lifetime allowance. Cost-effective for larger companies.
Relevant Life Insurance
Individual policies for each employee. No minimum staff numbers. Flexible cover amounts per person. Not part of pension scheme so no lifetime allowance issues. Ideal for small businesses and high earners.
Death-in-Service via Pension
Some workplace pensions include basic death-in-service cover (typically 1-2x salary). Check your pension scheme terms. This may be sufficient for basic needs but is usually lower than standalone cover.
Voluntary Group Life
Some employers offer voluntary life insurance where employees pay their own premiums but benefit from group rates. Not tax-efficient like relevant life, but provides access to cheaper cover.
Tax Benefits for Employers Providing Life Insurance
Offering company life insurance for employees provides significant tax advantages for both employer and employee under HMRC rules:
Corporation Tax Relief
Both group life and relevant life premiums are deductible as business expenses against corporation tax. At 25% CT rate, every £100 of premiums costs the company just £75 after tax.
No P11D on Relevant Life
Relevant life insurance creates no benefit-in-kind charge. Employees pay no income tax or NI on the premiums. This is a unique advantage over almost all other employee benefits.
P11D on Group Life
Group life premiums exceeding the pension annual allowance may create a P11D charge. However, for most employees within standard pension limits, there is no additional tax.
Employer NI Savings
Relevant life premiums attract no employer NI (13.8% saving). This makes relevant life significantly cheaper than paying equivalent salary for the employee to buy personal cover.
Recruitment & Retention
Life insurance is consistently rated as one of the top 3 employee benefits. Offering it helps attract and retain talent, reducing recruitment costs which CIPD estimates at £3,000+ per hire.
Company Life Insurance: Group Life vs Relevant Life
Group Life vs Relevant Life Insurance
Key Person Insurance
Relevant life: Individual policies, no minimum employees, no pension lifetime allowance, flexible cover per person, no P11D. Ideal for small businesses.
Other Product
Group life: Single scheme, needs 3-5+ employees, part of pension (lifetime allowance applies), fixed salary multiple, potentially lower per-head cost for large groups.
When you need it: Companies with fewer than 10 employees typically choose relevant life. Larger companies may find group schemes more cost-effective but should consider relevant life for higher earners.
Company-Paid vs Employee-Paid Cover
Key Person Insurance
Company-paid (relevant life or group life): Tax-efficient, corporation tax deductible, attracts and retains staff. The company bears the cost but saves on tax.
Other Product
Employee-paid (personal policy): No tax relief, employee bears full cost from post-tax salary. More expensive but completely independent of employment.
When you need it: Always offer company-paid cover if budget allows. It costs less after tax relief than paying the employee enough extra salary to buy their own cover.
How to Set Up Employee Life Insurance
Setting up company life insurance for employees is straightforward:
- Assess your workforce — Identify which employees to cover and appropriate cover levels. Most companies start with directors and senior staff.
- Choose your approach — Relevant life insurance for small teams; group life for larger workforces. Some companies use both.
- Get quotes — Use our comparison tool or speak to a specialist broker. Premiums depend on age, health, cover amount and policy type.
- Communicate the benefit — Ensure employees understand and value their cover. Include it in offer letters, contracts and benefits documentation.
- Review annually — Update cover as salaries change, new employees join, or people leave. Policy renewal is a good time to reassess.
For broader business protection beyond employee benefits, see our business life insurance guide and our key person insurance for small businesses page.
Employee Life Insurance: UK Market Statistics
13m+
UK employees with group life insurance
Source: ABI Group Insurance Report 2024
81%
Of employees rank life insurance as important benefit
Source: ABI Employee Benefits Survey 2024
£79
Average CPC for company life insurance for employees
Source: DataForSEO March 2026
2-4x
Typical death-in-service multiple of annual salary
Source: ABI Group Life guidance
£3,000+
Average UK recruitment cost per hire
Source: CIPD Resourcing Report 2024
13.8%
Employer NI saved on relevant life vs salary
Source: HMRC NI rates 2025/26
Trusted Sources & Further Reading
This company life insurance for employees guide is informed by:
- ABI Claims Data 2024 — Record £8bn in protection claims; 97%+ life claims acceptance rate
- CIPD Health & Wellbeing Report — Employee benefits benchmarking; life insurance in top 3 valued benefits
- HMRC BIM45525 — Tax treatment of group and relevant life premiums
- GOV.UK P11D Guidance — Reporting employee benefits; relevant life is exempt
- FCA Insurance Guidance — Consumer rights and regulation
- MoneyHelper — Government-backed insurance guidance
- Aviva Claims Report 2025 — 97.9% of individual protection claims paid; £1.33bn paid in 2024
- GOV.UK NI Rates — Current employer NI rates for benefit calculations
Company Life Insurance For Employees FAQs
How do I set up life insurance for my employees?
You have two main options: relevant life insurance (individual policies, no minimum staff, no pension lifetime allowance issues) or group life insurance (single scheme for all employees, usually needs 3-5+ staff). Both are corporation tax deductible. A specialist broker can help you choose the best approach for your company size.
Is company life insurance a taxable benefit for employees?
Relevant life insurance creates no taxable benefit (no P11D charge). Group life insurance is a registered pension benefit and is usually tax-free for employees within pension annual allowance limits. In both cases, employees typically pay no income tax or NI on the premiums paid by the company.
How much death-in-service cover should I provide?
The industry standard is 2-4x annual salary. Some companies offer higher multiples (up to 10x) for senior staff. Consider the employee's likely financial commitments, including mortgage, dependants and other debts. Relevant life insurance allows flexible cover amounts per individual, while group schemes usually apply a fixed multiple to all members.
Do I need to provide life insurance for all employees?
Learn More About Your Options
Compare key person insurance information and find the right type of cover for your business.
We are a comparison and information resource, not an insurer or broker. For regulated advice, consult a qualified professional.