Last reviewed and updated by Darren Shepherd: October 2026
If you are a director of your own limited company, your company can usually pay for two important protection policies for you: a relevant life plan, which pays your family a lump sum if you die, and executive income protection, which keeps an income coming if you are too ill to work.
Because the company pays from its profit, rather than you paying from money that has already been taxed twice, both can cost far less. For a higher rate director, often around half.
Watch: the two policies explained, in about a minute
When you work for a big employer, two things usually come with the job. Death in service, which pays your family a lump sum if you die while you work there. And sick pay, which keeps your wages coming if you are off ill.
When you run your own limited company, nobody sets those up for you. You are the employer as well as the employee. Plenty of directors either go without, or pay for cover personally, out of dividends that have already been through corporation tax and dividend tax.
There is a better way. Your company can pay for both.
The two policies at a glance
| Relevant life plan | Executive income protection | |
|---|---|---|
| What it protects | Your family, if you die | Your income, if you cannot work through illness or injury |
| Think of it as | Your own death in service | Your own sick pay |
| What it pays | A tax free lump sum | A monthly income |
| Who it pays | A trust for your family | Your company, which pays you as salary |
| Who pays the premium | Your company | Your company |
| Allowed against corporation tax | Normally yes | Normally yes |
| Benefit in kind for you | Not normally | Not normally |
| Is the payout taxed | Normally no | Yes, as salary through PAYE |
| How much cover | A multiple of salary and dividends, often 15 to 30 times | Typically up to 80% of salary and dividends |
Why it matters who pays
Say a policy costs £100 a month. If you pay it yourself out of dividends, your company has to earn a lot more than £100 to get that money to you after tax.
| To pay £100 of premium | Basic rate director | Higher rate director |
|---|---|---|
| Company profit needed if you pay personally | £138 | £192 |
| Company profit needed if the company pays | £100 | £100 |
| Saving | About 28% | About 48% |
Based on 2026/27 dividend tax rates and 19% corporation tax. If your company pays 25% corporation tax, the saving is bigger still. These are illustrations, not quotes.
You pay or your company pays?
Put in what your cover costs each month, or what it would cost, and see how much company profit it takes both ways.
A rough guide using 2026/27 dividend tax rates (10.75%, 35.75% and 39.35%). It assumes you take the money as dividends and have already used your £500 dividend allowance, that the premium stays the same, and that HMRC allows the premium as a business expense for your company. The 26.5% option is the effective rate on profit inside the marginal relief band. Your accountant can confirm your own figures.
Policy 1: Relevant life plan
A relevant life plan is life cover that your company owns and pays for. If you die, or are diagnosed with a terminal illness, the insurer pays a lump sum into a trust, and the trust pays it to your family. The business never gets the money.
The premiums are normally an allowable business expense, they are not treated as a benefit in kind for you, and the payout is normally free of income tax and inheritance tax.
Read the full guide to relevant life plans →
Policy 2: Executive income protection
Executive income protection is, in plain terms, sick pay for yourself. If illness or injury stops you working, the insurer pays a monthly benefit to your company after an agreed waiting period. Your company then pays it to you as salary.
The premiums are normally an allowable business expense and not a benefit in kind. The payout is taxed as salary when it reaches you, but you can usually cover up to around 80% of your salary and dividends, which is more than most personal policies allow.
Read the full guide to executive income protection →
Who can have them?
Both policies rely on there being an employer and an employee, so they are for directors and employees of a limited company, including one person companies. If you are a sole trader or a partner, you cannot have either, though you can still get personal life cover and personal income protection.
Questions to ask yourself
- If I died tomorrow, would my family be able to pay the mortgage and keep going?
- If I could not work for six months, how long would my savings and the business last?
- Am I paying for any of my protection personally, out of dividends?
- Has anyone ever shown me personal cover and company paid cover side by side?
If any of those make you uncomfortable, read the full guides and then speak to your accountant and a good protection adviser. And please do not cancel any existing cover until something new is fully in place.