Relevant life insurance cost is set in two steps: an insurer prices the premium for the one employee covered, and the tax treatment then decides what the company really pays. The first figure depends on who is insured and how much cover is chosen; the second is where Royal London’s worked example for advisers, set out below, shows how far the tax rules can move the bill.

For a premium that fits your own director or employee, send a few details through the short enquiry box here and an FCA-authorised broker rings back, free of charge, to price it with the insurers they work with.

Who pays a relevant life premium, and what sets it?

The employer pays it, because the employer takes out the policy on one employee or director; what relevant life insurance is covers how the arrangement works. Zurich’s key features (August 2025) list three things the cost depends on: the covered person’s age, health, occupation and tobacco or nicotine use; the amount and type of cover; and how long the cover is to last. Its “Confirmation of terms” then shows the price.

Once the policy is running the premium is usually fixed. Zurich describes its premiums as guaranteed, staying the same unless the company chooses Increasing Cover or changes the cover (or the terms change because of new information about the application), and Aviva’s key features (January 2026) say the amount paid stays level unless increasing cover is chosen. Both Aviva and Zurich cap the sum assured at a multiple of the person’s income or total remuneration, a multiple that falls with age, so the most a company can insure, and so the premium, is tied to what the person earns; relevant life cover limits sets the multiples out.

How does tax change what the company pays?

This is the part of the cost that differs most from ordinary life cover, and each step has a condition. HMRC’s Employment Income Manual (July 2020) says the premiums escape the EFRBS charge but could still be taxed under other provisions, and that a benefit in kind charge “may be exempted by section 307, depending on the circumstances”. Its note on section 307 ITEPA 2003 (February 2019) adds that the exemption covers one part of the Act only: “It is an earnings-only exemption”. Legal & General’s adviser guide (June 2026) and Royal London’s adviser guidance (20 May 2026) both say the premium is not usually treated as a P11D benefit, which is a statement about the usual case rather than a guarantee.

For the company’s own tax, HMRC’s Business Income Manual (May 2023) on the “wholly and exclusively” test says “expenditure cannot be deducted in computing trading profits unless it is incurred wholly and exclusively for the purposes of the trade, profession or vocation.” Royal London says that where the premiums are paid on that basis as part of the employee’s remuneration they can be “treated as a trading expense. Though this could be challenged by HMRC”, and that the cost of the employee’s package should be “reasonable in light of his or her contribution to the business”. Aviva says the expense must not be “excessive” in the circumstances. The fuller rules are in how relevant life insurance is taxed; they can change, and a company’s accountant confirms how they apply.

What does an insurer’s worked example show?

Royal London’s guidance for advisers (20 May 2026) puts numbers on the difference. Its table is an illustration for advisers, built on a round £1,000 monthly premium chosen for the example, not a price any company was quoted. The left column treats ordinary life cover paid by the company as a benefit in kind; the right column is a relevant life plan “assuming it qualifies for tax relief”.

Royal London’s example, monthlyOrdinary life coverRelevant life plan
Premium£1,000£1,000
Employee’s National Insurance at 2%£34Nil
Income tax at 40%£690Nil
Employer’s National Insurance at 15%£259Nil
Total gross cost£1,983£1,000
Corporation tax relief at 25%£496£250*
Net cost£1,487£750*

The assumptions are printed directly under the original table:

*Assumes that corporation tax relief is 25% (main rate) and is allowed under the ‘wholly and exclusively’ rules. In both cases we’ve assumed a payment of £1,000 each month for the life cover on an employee who’s paying income tax at 40% and employee’s National Insurance at 2% on the top end income.

So the starred figures hold only if the relief is allowed, and a different tax band, rate or salary level changes every row. The table shows the mechanism, not what your company would save.

Curious how a real quote for your director would sit against that example? Leave a few details in the enquiry box and a broker rings you, without charge, to price it with the insurers they use.

How does that compare with personally paid life cover?

The example’s left-hand column is the nearest thing to personal cover. When a company pays for ordinary life cover on an employee, the example adds income tax and both National Insurance charges to the £1,000, which is why its total gross cost reaches £1,983. Whether a director would rather pay for a separate personal policy out of their own taxed income is a matter for them and an accountant, and key person insurance compared with relevant life covers the other business policy people confuse it with.

Zurich is careful on this point: its key features say those tax benefits “are not guaranteed” and depend on the circumstances and on the policy continuing to meet HMRC rules. A lower net cost is therefore a possibility to check, not a certainty.

Can a relevant life calculator work out the premium?

A relevant life calculator can mean two different sums, and they need different inputs.

  • The premium. This is the insurer’s price for one person. The details it turns on are the ones Zurich lists: age, health, occupation, tobacco or nicotine use, the amount and type of cover, and the term. At Aviva and Zurich the amount of cover is capped by the person’s pay, so their income or total remuneration is needed too. Zurich’s “Confirmation of terms” is where its actual price appears.
  • The tax effect. This is what the table above works out: given a premium, what the company would pay through a relevant life plan against ordinary cover treated as a benefit in kind. Its inputs are the ones in the table: the premium, the employee’s income tax and National Insurance rates, the employer’s National Insurance rate and the corporation tax rate.

Royal London’s guidance, written for advisers, mentions its own tool in a single line straight after that table: “Our Relevant life calculator can also be used.” That placing puts it with the tax effect; the premium still comes from an insurer’s quote. Which tools a business can use itself, and which sit on adviser-only sites, is something a broker can explain on the call-back at no charge. How the insurers’ plans differ is set out in relevant life insurance providers, and the wider business range sits in business protection insurance.

If a quote is the next step, the enquiry box here is where to start; the broker who calls can walk you through the figures at no charge.

Frequently asked questions

How much is relevant life insurance?

There is no one monthly figure: the price is set for the person insured, from their age, health, occupation and tobacco use, the amount of cover and the length of the term. A quote gives the price for that one person.

Is relevant life insurance cheaper than personal life insurance?

Royal London’s worked example shows a lower net cost for the relevant life plan, on its stated tax assumptions and only if the relief is allowed. Zurich says the tax advantages are not guaranteed, so treat it as something to check.

Do directors have to pay tax on the premiums?

Legal & General and Royal London say the premium is not usually treated as a P11D benefit. HMRC says a benefit in kind charge may be exempted by section 307, depending on the circumstances, while noting that tax under other provisions can still apply.

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