Key person or relevant life: who gets paid?
Key person insurance pays the business, to keep it steady without someone it depends on. Relevant life cover is life insurance the company pays for that gives the employee's family financial security.
Both sit on a director's life and both are paid for by the company, so they are easy to confuse.
This page sets them side by side.
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.
Same life insured, different job
The deciding question is where the money goes.
Key person cover is owned and paid for by the employer, so any payout goes to the employer (Legal & General ↗).
A relevant life plan is taken out and paid for by the employer on behalf of an employee or director, with benefits paid through a trust to their family (Royal London ↗).
Rows summarise how HMRC and the insurers describe the products; check each at its link. Insurers differ on who owns a relevant life plan: Legal & General says the employer (Legal & General ↗).
Key person cover pays the business
HMRC describes key person cover as a policy an employer takes out in its own favour against loss of profits from the death, critical illness, sickness, accident or injury of an employee, director or other key person (HMRC ↗).
The company is both the applicant and the plan owner (Royal London ↗), so no trust is needed (Royal London ↗).
To insure someone as a key person, Legal & General says the business must be able to show it would lose profits in their absence (Legal & General ↗).
The money can fund a replacement, cover lost profit or repay a loan.
Owner
The company takes out the policy
It is the applicant and the plan owner, and it pays the premiums.
Claim
The business makes a claim
If the key person passes away, or is diagnosed with a covered illness where critical illness cover was chosen.
Payout
The money goes to the business
To fund recruitment, replace lost profit or repay a loan.
Relevant life pays the family
A relevant life plan is single life cover that an employer takes out and pays for on behalf of an employee or director (Royal London ↗).
Aviva says it must be written under its Relevant Life Trust for the employee's chosen beneficiaries (Aviva ↗).
Royal London says it is not a company asset: the trustees own it (Royal London ↗).
That is why it cannot double as key person cover.
Legal & General says its Relevant Life Plan should not be used for business protection, such as key person or shareholder protection (Legal & General ↗).
Owner
The employer pays; the plan sits in trust
Written into trust from the start, for the employee’s chosen beneficiaries.
Claim
The trustees make a claim
If the employee passes away before a set age, which HMRC’s conditions cap at 75.
Payout
The trustees pay the family
The money goes to the beneficiaries, not to the company.
How HMRC treats each one
Key person premiums are deductible only if the sole purpose is meeting a loss of trading income (HMRC ↗) and, for life cover, the policy is term insurance with no other benefits (HMRC ↗).
Relevant life is defined in section 393B of ITEPA 2003 (legislation.gov.uk ↗), and since 6 April 2019 its exemption covers a benefit for any individual or a recognised charity (HMRC ↗).
The table sets out the rest.
Tax depends on your facts, so check it with your accountant.
Which one are you after?
Tick what you want the cover to do.
The needle shows which product matches those aims.
It is not a recommendation: an FCA-authorised adviser can tell you what suits your circumstances.
Nothing you tick is stored or sent.
Many companies hold both on the same director, because they answer different questions.
Tick what you want
The needle moves with each answer.
Where shareholder protection fits
Neither policy keeps ownership with the people running the business.
That is shareholder protection: a cross option agreement gives the continuing shareholders the option to buy the shares from the personal representatives (Royal London ↗), and life cover funds the purchase.
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.
- HMRC Business Income Manual, BIM45525 ↗Key person premiums: the two conditions for a deduction
- HMRC Employment Income Manual ↗Relevant life policy conditions and the EFRBS treatment
- ITEPA 2003, section 393B ↗Where "relevant life policy" is defined
- Royal London relevant life FAQs ↗Ownership, P11D and business expense treatment
- Legal & General relevant life guide ↗Ownership, and why it is not business protection
- Legal & General key person insurance ↗Who owns, pays for and receives key person cover
- Aviva relevant life adviser guide ↗Employer pays; written under Aviva’s Relevant Life Trust
Key person vs relevant life, answered
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.