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Company life insurance for employees

Company life insurance for employees, for their families

Company life insurance for employees is usually called death in service: a way to give your employees' families financial security, with a lump sum paid if an employee passes away while they work for you.

An employer can provide it through a group life scheme or through individual relevant life plans.

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.

Group or individual? ↓How it is taxed →

01 · Key facts

Company life insurance for employees: key facts

Six points about life cover an employer provides.

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

Death in service benefit →

Death in service is an employee benefit that pays a tax-free cash sum to the family if an employee passes away while on the company payroll (Legal & General ↗).
It is usually a multiple of annual salary, and most UK employers offer between 2 and 4 times salary (Legal & General ↗).
The benefit is paid at the trustees' discretion; they take an employee's expression of wish into account (Legal & General ↗).
When an employee leaves, they are no longer protected by the employer's death in service benefit (Legal & General ↗).
No income tax arises under the residual benefits charge on an employer's provision for a death benefit (legislation.gov.uk ↗).
A relevant life plan is single life cover an employer takes out and pays for on behalf of one employee or director (Royal London ↗).

02 · What it is

What is company life insurance for employees?

MoneyHelper says employee packages often include death in service benefits that provide cover linked to salary (MoneyHelper ↗), typically two or four times annual salary (MoneyHelper ↗).

There are two ways to provide it.

A group scheme covers many employees on one policy.

A relevant life plan covers one named person at a time.

Pick one to see how it works.

Group life insurance →Relevant life insurance →

Which route?

Pays each employee’s family

Group life (death in service)

A group life policy pays benefits on the death of more than one individual, on each of their deaths (legislation.gov.uk ↗).
Death in service pays a tax-free cash sum to the family if the employee passes away while on the company payroll, at the trustees' discretion (Legal & General ↗).
Most UK employers that offer it pay between 2 and 4 times salary (Legal & General ↗).
An excepted group life policy pays a capital sum on death under an age no higher than 75 (legislation.gov.uk ↗), worked out the same way for each death (legislation.gov.uk ↗).
When an employee leaves, they are no longer protected by it (Legal & General ↗).

Group life insurance →

03 · Tax

Tax benefits for employers providing life insurance

For the employee, HMRC's 2018 reform lets the beneficiary of employer-paid life cover be any individual or registered charity without the premiums being a taxable benefit in kind (HMRC ↗).

Since 6 April 2019 the section 307 exemption covers the same range of beneficiaries (HMRC ↗).

For the employer, Royal London says relevant life premiums are generally a business expense if paid wholly and exclusively for the business (Royal London ↗).

We have no HMRC page on group life premiums to cite, so check that with your accountant.

Group life

Relevant life

Premiums

No HMRC page we can cite: check with your accountant

Generally a business expense if paid wholly and exclusively for the business, in Royal London's view (Royal London ↗)

Benefit in kind

Not a taxable benefit where the beneficiary is any individual or registered charity (HMRC ↗)

Not a P11D benefit, says Royal London (Royal London ↗)

Payout

Not usually subject to income tax or inheritance tax, says Legal & General (Legal & General ↗)

Outside the EFRBS charge (HMRC ↗); held in trust, not part of the employee's estate, says Royal London (Royal London ↗)

Swipe to compare

04 · Group or relevant life

Company life insurance: group life vs relevant life

A group scheme treats everyone alike: the legislation requires the same method of working out the benefit on each death for an excepted policy (legislation.gov.uk ↗).

A relevant life plan is set up person by person.

They also differ when someone leaves.

Group cover stops (Legal & General ↗); Royal London says a relevant life plan can be assigned to the employee to keep as a personal plan (Royal London ↗).

Relevant life for directors →Corporate life insurance →

Many employees

Group life scheme

One person

Relevant life plan

The policy

Benefits on the death of more than one individual (legislation.gov.uk ↗)

A single-life policy, or an excepted group life policy (legislation.gov.uk ↗)

The benefit

Same method of calculation for each death (legislation.gov.uk ↗)

Set for the person insured

Age limit

If excepted: death under an age no higher than 75 (legislation.gov.uk ↗)

Death under an age no higher than 75 (HMRC ↗)

Who is paid

If excepted: an individual or charity, directly or through trustees (legislation.gov.uk ↗)

Individuals and charities (HMRC ↗)

Pensions

A death payment through a pension scheme is not taxable, says MoneyHelper (MoneyHelper ↗)

Outside pension legislation, says Royal London (Royal London ↗)

On leaving

Cover ends (Legal & General ↗)

Trustees can assign it to the employee (Royal London ↗)

Swipe to compare

05 · Setting up

How to set up employee life insurance

Decide who you want to cover and on what basis, then ask an insurer or an authorised broker to set it up.

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

Once it is in place, ask each employee to complete an expression of wish, because the trustees take it into account when they decide who receives the money (Legal & General ↗).

Key person insurance comparison →Renewing cover →Small business cover →

Who

Decide who to cover

The whole workforce through a group scheme, or named people through relevant life plans, or both.

Basis

Set the benefit

A group scheme uses one formula for everyone, often a multiple of salary.

Buy

Use an authorised firm

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

Tell

Explain it to your staff

Include it in offer letters and ask each employee for an expression of wish.

Review

Keep it up to date

Salaries change and people join and leave; the scheme should keep pace.

06 · UK figures

Employee life insurance: UK market statistics

We print only figures a named source publishes: Legal & General's description of what employers offer, and the Association of British Insurers' claims figures.

Each links to its source.

Business life insurance →

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

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

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 ↗)

07 · 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

Life insurance for employees, answered

There are two routes.

A group life scheme is one policy covering many employees, paying a death in service benefit on each death; for an excepted policy, worked out the same way for everyone.

Relevant life plans are individual policies the employer takes out and pays for, each written in trust for one employee’s beneficiaries.

An insurer or an FCA-authorised broker can set up either. Aviva relevant life guide ↗

HMRC’s 2018 policy paper said employer-paid life cover premiums would not be treated as a taxable benefit in kind where the beneficiary is any individual or registered charity.

For relevant life, Royal London says HMRC does not treat the premiums as a P11D benefit.

Legal & General says death in service payments are not usually subject to income tax or inheritance tax. HMRC policy paper ↗

That is your choice as the employer, and we cannot advise on it.

For reference, Legal & General says a death in service benefit is usually a multiple of annual salary and that most UK employers offer between 2 and 4 times salary.

MoneyHelper says life cover through work is typically two or four times annual salary. Legal & General on death in service ↗

We cannot advise on your contracts.

MoneyHelper describes death in service as something employee packages often include.

Who a group scheme covers is set by its eligibility terms, which you agree with the insurer, and a relevant life plan covers one named person.

Check what your employment contracts already promise. MoneyHelper ↗

Legal & General describes death in service as an employee benefit that pays a tax-free cash sum if an employee passes away while on the company payroll, and says an employee who leaves is no longer protected by it.

Life insurance is a separate policy you arrange yourself, for a cash sum you choose. Legal & General on death in service ↗

Beta · information only

Protecting the business too? Size the key person cover.

Death in service looks after families. If the business relies on someone to keep its profits steady, the calculator works through the methods 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.