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Corporate life insurance, layer by layer

Corporate life insurance is the life cover an employer arranges for its people and for itself: a group life scheme that pays death in service benefits to staff families, relevant life cover for individual directors and executives, and key person cover that protects the company.

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.

See the three layers ↓Group vs individual →
01 · Key facts

Corporate life insurance: key facts

Six points from the legislation, HMRC and the insurers.

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

Business life insurance →
  1. A group life policy pays benefits on the death of more than one individual, on each of their deaths (legislation.gov.uk ↗).
  2. 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 ↗).
  3. Most UK employers that offer death in service pay between two and four times salary (Legal & General ↗).
  4. A relevant life policy is either an excepted group life policy or a single-life policy meeting the conditions in ITEPA 2003 section 393B (legislation.gov.uk ↗).
  5. Royal London says relevant life plans are non-registered schemes that do not come under pension legislation (Royal London ↗).
  6. A policy where the company is the beneficiary is not an excepted group life policy (HMRC ↗).
02 · What it is

What is corporate life insurance? Three layers

Corporate life insurance is usually built in layers.

A group scheme covers the workforce.

Individual relevant life plans can cover directors and senior people.

Key person cover protects the company itself.

Group protection is its own market: Canada Life, for one, presents itself as a group protection provider with group life, group income protection and group critical illness products (Canada Life ↗).

Group life insurance →Death in service →Executive income protection →

Who is the cover for?

Pays each employee’s family

Group life (death in service)

Group life insurance →
03 · Tax

Tax treatment of corporate life insurance

Section 307 of ITEPA 2003 says no income tax arises under the residual benefits charge on an employer's provision for a death benefit (legislation.gov.uk ↗).

Since 6 April 2019 that covers provision for the employee, any other individual or a recognised charity (HMRC ↗).

A group life policy that does not meet the excepted conditions is within the chargeable event rules, even if it provides death cover only (HMRC ↗).

For inheritance tax, HMRC says distributions from an excepted group life trust on a death in its first ten years are likely to be taxed at 0% (HMRC ↗).

Check the detail with your accountant.

Key person insurance tax →

Group life

Relevant life

Key person

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 ↗)
Deductible only if the sole purpose is trade (HMRC ↗) and, for life cover, it is term insurance with no other benefits (HMRC ↗)
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 ↗)
Not the employee's policy: the company owns it (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 ↗)
Trading income, where the premiums were deducted (HMRC ↗)
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04 · Group or individual

Corporate life insurance: group vs individual policies

A group scheme covers many people on one policy, and the legislation requires the benefit to be worked out the same way for each death (legislation.gov.uk ↗).

An individual relevant life plan covers one person on terms set for them.

The two can sit together: a group scheme for the workforce, and relevant life plans for directors.

An excepted group life policy (legislation.gov.uk ↗) and a single-life relevant life plan (HMRC ↗) must both pay on death under an age no higher than 75.

Relevant life insurance →Relevant life for directors →

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
Trustees can assign it to the employee (Royal London ↗)
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05 · Setting up

Setting up corporate life insurance

Start from what you already provide: pension death benefits, any existing group scheme and individual policies.

Then decide who each layer covers.

For death in service, the trustees decide who receives the money, and Legal & General says they take an employee's expression of wish into account (Legal & General ↗).

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

Aviva →Legal & General →Zurich →Canada Life →Royal London →
01

Audit

List what you already provide

Pension death benefits, any group scheme, and individual policies on directors.

02

Workforce

Decide the group layer

Who is eligible, and the salary multiple the scheme pays.

03

Directors

Decide the individual layer

Relevant life plans for directors and senior people, each written in trust.

04

Company

Protect the business itself

Key person cover pays the company; shareholder protection keeps ownership in the right hands.

05

Check

Use an authorised firm

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

06 · UK figures

Corporate 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.

Shareholder protection →Key person insurance →Key person insurance for directors →Limited company 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

Corporate life insurance, answered

Corporate life insurance is life cover an employer arranges for its people and for itself: a group life scheme that pays a death in service benefit to staff families, relevant life cover for individual directors and executives, and key person cover that pays the company if it loses someone it depends on.

A group life policy pays benefits on the death of more than one individual.

As a death in service benefit, Legal & General says it pays a tax-free cash sum if an employee passes away while on the company payroll, paid at the trustees’ discretion, who take account of the employee’s expression of wish.

Most UK employers that offer it pay between two and four times salary. Legal & General on death in service ↗

Group life is one policy covering many employees, with the benefit worked out the same way for each death.

Section 393B of ITEPA 2003 defines a relevant life policy as an excepted group life policy or a single-life policy meeting the section’s conditions, so an individual relevant life plan covers one person.

Royal London says relevant life plans do not come under pension legislation. ITEPA 2003, section 393B ↗

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.

Royal London says relevant life premiums are generally a business expense if paid wholly and exclusively for the business.

We have no HMRC page on group life premiums to summarise, so check that with your accountant. HMRC BIM45525 ↗

We do not publish prices or give quotes.

An insurer prices a group scheme for your workforce and the cover you choose, and prices an individual policy for the person insured, so the only reliable figure is one an insurer or an authorised broker gives you.

Beta · information only

Protecting the company itself? Size the key person cover.

Group and relevant life look after families. If the business needs protecting too, 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.