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Limited company life insurance, paid by your Ltd

Limited company life insurance means life cover your company pays for, rather than you, to keep your family, the company and your co-owners secure.

Three policies do it: relevant life cover for a director's or employee's family, key person insurance for the company, and shareholder protection for the co-owners.

Each has its own owner, payee and tax treatment.

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? ↓Company or personal? →
01 · Key facts

Limited company life insurance: key facts

Six points about cover a limited company pays for.

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

Business life insurance →
  1. For relevant life, the employer takes out the policy and pays the premiums, and it is written in trust for the employee's beneficiaries (Aviva ↗).
  2. Royal London says any employee or director of a limited company can have a relevant life plan (Royal London ↗).
  3. A relevant life plan can only provide life cover or terminal illness benefit, not critical illness (Royal London ↗).
  4. For key person cover, the company is both the applicant and the plan owner (Royal London ↗), and no trust is needed (Royal London ↗).
  5. Legal & General's shareholders' cross option agreement is designed for shareholders of limited companies (Legal & General ↗).
  6. HMRC allows key person premiums as a deduction only if the sole purpose is meeting a loss of trading income (HMRC ↗).
02 · What it is

What is limited company life insurance?

A limited company is a separate legal person, so it can own a policy.

Royal London puts it this way: as a company has its own legal identity, it is both the applicant and the plan owner of key person cover (Royal London ↗).

Relevant life works differently.

The company is the proposer, but the plan sits in trust from the start and the trustees own it, not the company (Royal London ↗).

Pick who would need the money to see which policy pays them.

Key person insurance for limited companies →Relevant life insurance →

Who would need the money?

Pays the family, through a trust

Relevant life cover

  • Single life cover an employer takes out and pays for on behalf of an employee or director, with benefits paid through a trust to their family (Royal London ↗).
  • It can only provide life cover or terminal illness benefit, not critical illness (Royal London ↗).
  • HMRC's conditions: a capital sum on death under an age no higher than 75, and no surrender value (HMRC ↗).
  • Not for business protection: Legal & General says its plan should not be used for key person or shareholder protection (Legal & General ↗).
Relevant life insurance →
03 · Tax

Tax benefits of limited company life insurance, and their limits

For relevant life, Royal London says HMRC does not treat employer-paid premiums as a P11D benefit, and that neither employee nor employer pays National Insurance on them (Royal London ↗).

In its view the premiums are generally a business expense if paid wholly and exclusively for the business (Royal London ↗).

Key person relief has conditions.

HMRC's manual lists a policy on directors who are major shareholders, but not on other employees, as a circumstance that may point to a non-trade purpose (HMRC ↗), which matters in a small company where the directors own the shares.

Check your position with your accountant.

Key person insurance tax →

Relevant life

Key person

Shareholder protection

Premiums
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 ↗)
Depends on the structure: check with your accountant
Benefit in kind
Not a P11D benefit, says Royal London (Royal London ↗)
Not the employee's policy: the company owns it (Royal London ↗)
Depends on the structure: check with your accountant
Payout
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 ↗)
Business property relief still available under a cross option agreement, says Royal London (Royal London ↗)
Swipe to compare
04 · Company or personal

Limited company life insurance vs the alternatives

The alternative is a personal policy: one you arrange and pay for yourself (Legal & General ↗), which MoneyHelper says can be written in trust so its value is not part of your estate (MoneyHelper ↗).

We do not say which suits you; that is advice, and an FCA-authorised adviser can give it.

The table sets out the differences the sources describe.

Key person vs life insurance →

Through the company

Relevant life

Paid by you

Personal policy

Who pays
The employer (Aviva ↗)
Who owns it
The trustees, not the company (Royal London ↗)
You, or your trustees if in trust
Benefit in kind
Not a P11D benefit, says Royal London (Royal London ↗)
None: it is not a work benefit
Critical illness
Not allowed: life or terminal illness only (Royal London ↗)
Depends on the policy you choose
If you leave
Trustees can assign it to you, or a new company can take it over (Royal London ↗)
Not tied to your company
Swipe to compare
05 · Setting up

Setting up life insurance through your limited company

Each policy is set up differently, because each has a different owner.

Relevant life needs a trust from the start (Royal London ↗).

Key person cover needs none (Royal London ↗), but Legal & General says you need the key person's agreement (Legal & General ↗).

Shareholder protection needs an agreement between the owners as well as the policies (Royal London ↗).

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

Relevant life for directors →Shareholder protection →Directors life insurance →
01

Relevant life

The company applies; the plan goes in trust

The company pays the premiums. The trustees hold the plan for the director’s or employee’s beneficiaries.

02

Key person

The company applies, owns and is paid

With the key person’s agreement, and evidence the business would lose profit without them.

03

Shares

The owners sign a cross option agreement

Life cover on each shareholder funds the survivors buying the shares.

04

Check

Use an authorised firm

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

06 · UK figures

Limited company life insurance: UK numbers

We print only figures a named source publishes: the Association of British Insurers and one insurer's own research.

Each links to its source.

Key person insurance →
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 ↗)

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

Limited company life insurance, answered

Yes, through the policies built for it.

Aviva says the employer takes out its Relevant Life Insurance and pays the premiums, with the policy written in trust for the employee’s beneficiaries.

Key person cover is owned and paid for by the company and pays the company.

Shareholder protection funds the co-owners buying a shareholder’s stake. Aviva relevant life guide ↗

It depends on the policy.

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

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.

Check your position with your accountant. HMRC BIM45525 ↗

Royal London says any employee or director of a limited company can have a relevant life plan, which the company pays for and which pays the director’s family through a trust.

For key person cover, Legal & General says the business must be able to show it would lose profits in the key person’s absence.

Check each insurer’s terms. Royal London relevant life FAQ ↗

For relevant life, Royal London says that when an employee leaves service the trustees can assign the plan to the employee to continue as a personal plan, and that if the employee starts a new company, the new company can take over the plan and pay the premiums.

Key person cover belongs to the company, so what happens to it is for the company and the insurer’s terms: ask the insurer before you close. Royal London relevant life FAQ ↗

We cannot tell you which suits you: that is advice, and an FCA-authorised adviser can give it.

The differences are these.

Through the company, relevant life is paid for by the employer and Royal London says HMRC does not treat the premiums as a P11D benefit.

A personal policy is one you arrange and pay for yourself, and it is not tied to your company.

Relevant life covers death or terminal illness only, not critical illness. Royal London relevant life FAQ ↗

Beta · information only

Protecting the company too? Size the key person cover.

If your company depends on you, the calculator works through the earnings, profit and loan 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.