Comparison · Insurance · 2026
Death in Service vs Relevant Life Policy UK 2026: Employer Death Benefits Compared
Death in service and relevant life policies both provide a tax-free lump sum to an employee's family if they die while employed, and both are usually paid via a discretionary trust to avoid Inheritance Tax. The key difference is scale: death in service is a group scheme benefit, typically only viable for employers with several staff, while a relevant life policy is an individual policy that works for even a single-director company. Here is how they compare for 2026.
TL;DR - 30-Second Summary
- - Death in service: group scheme, usually needs several employees, often linked to the company pension, 2-4x salary lump sum
- - Relevant life policy: individual policy for one named employee, no minimum headcount, ideal for small companies and sole directors
- - Tax treatment: both are tax-free to the beneficiary, premiums are a deductible business expense, and neither is a taxable benefit in kind on the employee
Side by Side: Death in Service vs Relevant Life Policy
| Feature | Death in Service | Relevant Life Policy |
|---|---|---|
| Structure | Group scheme covering multiple employees | Individual policy for one named employee |
| Minimum employees | Usually several needed to be viable | None — works for a sole director |
| Typical cover | 2-4x annual salary | Insurer underwriting limit, often 25-30x income |
| Payout to beneficiary | Tax-free via discretionary trust | Tax-free via discretionary trust |
| Benefit in kind on employee | No | No |
| Premiums tax-deductible for employer | Yes | Yes |
| Best suited to | Medium/large employers with pension scheme | Small companies, contractors, director-only businesses |
How Death in Service Works
Death in service is typically offered as a group life assurance policy taken out by an employer covering all eligible employees, often tied to active membership of the workplace pension scheme. If an employee dies while employed, a tax-free lump sum (commonly 2-4 times salary, though this varies by employer) is paid to their family, usually distributed through a discretionary trust set up under the scheme rules so it does not form part of the deceased's estate.
Because it is priced as a group risk across many employees, death in service is usually cheaper per head than individual life cover, but insurers generally require a reasonable number of employees in the scheme to spread the risk, which limits access for very small employers.
How a Relevant Life Policy Works
A relevant life policy is an individual life insurance policy written in trust, taken out and paid for by an employer on the life of a specific employee. It was designed specifically to give small businesses, including one-person limited companies, access to the same kind of tax-efficient life cover that larger employers provide through group death in service schemes.
Because the company pays the premium as a business expense rather than the individual paying from taxed income, a relevant life policy is usually significantly cheaper in net terms than a personal life insurance policy of the same size, particularly for higher and additional rate taxpayers.
Who Should Choose What?
- - Medium and large employers with an existing group pension scheme
- - Businesses wanting a standard benefit across the whole workforce
- - Sole directors and small limited companies with a handful of staff
- - Contractors operating through their own limited company
- - Anyone wanting tax-efficient life cover paid through the business