The Director Who Assumed the Company Covered Them

If you are a director of your own limited company and you are asking whether you have death in service cover, the safe assumption is that you do not. A director has whatever cover the company has arranged, and most small companies have arranged none. Being an employee of your own business does not create life cover, and nobody sends a letter to point out that there is none in place.

This is one of the most common blind spots in small business. As a director you probably pay yourself through PAYE, file everything correctly, and think of yourself, quite rightly, as an employee of the company. So it feels natural to assume the employee benefits an employee expects, including death in service, are there in the background. For the great majority of one-person and small companies, they simply are not, because nobody ever set them up.

The good news is that the fix is well established and specifically designed for exactly your situation. A director without a group scheme can get the equivalent of death in service through a relevant life policy, paid for by the company, for a single employee. Understanding why the gap exists, and how that policy closes it, is what this page is for.

The short answer: you have only what you set up

Death in service is not a right that attaches to being employed. It is a benefit an employer chooses to buy and provide. In a large company, someone in HR arranged a group life scheme years ago and enrols every employee into it, so it feels automatic. In your company, that "someone" is you, and unless you have deliberately put something in place, there is nothing to enrol into.

So the question "do I have death in service?" really becomes "did I, or my accountant, ever arrange cover for me through the company?" For most directors the honest answer is no. That is not a failing; it is simply a task that never reached the top of the list, competing with everything else that running a business demands. But it means the default state is uncovered.

Why your company has no scheme by default

There is a structural reason a small company cannot simply "get death in service" the way a large one does. A conventional group life scheme is priced and underwritten across a group of employees, and insurers generally will not write group cover for a single life or a handful of lives. The whole model depends on spreading risk across a number of people, so the products aimed at large workforces are not available, or not economic, for a company of one or two.

This is why so many directors find they are uncovered even when they assumed cover was standard. It is also why the law offers them no help here: there is no obligation on any employer to provide death in service in the first place, as we explain in why your employer does not have to offer death in service. If a large employer is free to offer nothing, a director who has never set anything up is plainly in the same position, only without anyone else to ask.

Being an employee of your own company changes nothing

The trap is subtle, and it is worth naming precisely. You are genuinely an employee of your company. You have a contract, a salary, a payslip and PAYE. All of that is real. What none of it does is create insurance. Employment is the thing that would make you eligible for a scheme, if a scheme existed. It does not conjure the scheme into being.

Directors also tend to overestimate what other arrangements cover. A relevant life or group policy set up for staff would not automatically include a director unless the director was written into it. Business insurance, such as public liability or professional indemnity, has nothing to do with life cover; it protects the company against claims, not your family against your death. Key person cover, if the business holds any, is usually arranged to pay the company rather than your household, so it does not fill this gap either. And where two or more directors are involved, informal assumptions multiply: each may quietly assume the company, or the other, has sorted it out. The result is a company full of people who feel covered and a family that discovers, too late, that nobody was.

The relevant life policy: a group scheme for one person

The purpose-built answer is a relevant life policy. It is a single-employee death in service arrangement, designed precisely so that a director or a small company with no group scheme can still provide a lump sum to an employee's family on death.

The shape of it is straightforward. The company is the policyholder and pays the premiums. The policy covers one named life, you, and pays a lump sum if you die during the term. Crucially, it is written in trust from the outset, so the benefit is paid to your chosen family members through the trust rather than into the company or your estate. In practice it does much the same job as being a member of a group death in service scheme, without needing a group to exist.

There are limits that define it. A relevant life policy pays a lump sum only; it cannot include critical illness cover, it has no investment or surrender value, and it must end before a set age. It has to be arranged by an employer for an employee or director, so it is not a route for the genuinely self-employed sole trader with no company. Within those bounds, it is the closest thing a one-person company has to the benefit big employers take for granted.

How the company pays, and how HMRC treats it

The reason directors are steered towards a relevant life policy rather than simply paying for personal cover out of their own pocket is the tax treatment, and it is worth understanding at a high level even though your own accountant should confirm the detail for your setup.

Because the company pays the premiums, the money comes from company funds rather than from income you have already drawn as salary or dividends and paid personal tax on. The premiums are generally treated as an allowable business expense where they are incurred wholly and exclusively for the purposes of the trade, and they are not normally treated as a taxable benefit in kind for the employee, so they do not usually appear as extra taxable pay on your P11D. Because the policy is written in trust, the benefit is normally paid to your family free of income tax and outside your estate for inheritance tax.

Those are general features, not promises about your circumstances, and the phrase "wholly and exclusively" carries real weight in tax law. The sensible step is to have your accountant confirm the position before assuming the treatment applies to you.

Source: HMRC Business Income Manual on the "wholly and exclusively" test for deducting employee costs.

When you set a policy like this up, take the trust and the nomination as seriously as the cover itself. A benefit written in trust goes to the people you name, and an out-of-date nomination sends it to the wrong person just as reliably as a good one sends it to the right one. This bites hardest after a separation, as we describe in the case where an ex-wife is still named on a director's work life cover. If a beneficiary relies on means-tested support, a lump sum can also do unintended harm, which is worth planning around, as we set out in how a lump sum can affect a disabled adult child's benefits. You can get life insurance quotes and have an FCA-authorised broker arrange a relevant life policy in trust, though what an insurer offers always depends on your health and its underwriting.

The business itself needs a separate plan

A relevant life policy protects your family. It does nothing to protect the business, and the two are genuinely different problems that directors often blur together. If you die, your family gets the lump sum, but the company still faces the question of what happens to your role, your shares and its ability to keep trading.

Where there is more than one director, your death changes the ownership and control of the company in ways that need to be planned for in advance. We look at what actually shifts in a director dying when there are two of you, and at the specific danger of a company that stalls entirely in one director, one shareholder, one death and the deadlock that follows. Where your shares would pass to someone who cannot step into the role, such as a young child, there is a further layer to think through, covered in leaving shares to a child who cannot be a director.

The point is not that a relevant life policy is inadequate, but that it is aimed at one target. Family protection and business succession both need attention, and putting personal cover in place is the first of the two, not the whole of it.

Scotland and Northern Ireland

Company law is set at UK level under the Companies Act, and the tax treatment of a relevant life policy is administered by HMRC across the UK, so the core position for a director is the same wherever the company is registered. Relevant life policies are written in trust throughout the UK, and the products are sold on the same basis in all four nations.

Trust law itself differs in Scotland, where the terminology and some of the mechanics are not identical to those in England and Wales, and estate administration differs again in Northern Ireland. These differences affect the machinery around how a trust is drafted and how an estate is wound up rather than whether the cover works, but they are a reason to use an adviser familiar with your jurisdiction. You can read the wider picture in our guide to death in service and employer cover, including how the same benefit behaves for ordinary employees who do have a scheme.

Frequently asked questions

Do company directors get death in service?

Not automatically. A director of a small company has whatever the company has arranged, and most small companies run no group life scheme at all. Being an employee of your own business does not create cover, and nobody sends a reminder that there is none in place. The safe assumption is that you are uncovered until you have deliberately set something up.

Can a one-person company have death in service?

Yes, through a relevant life policy, which is designed for a single employee or director. The company owns and pays for it, the policy is written in trust for your family, and it does much the same job as a group scheme without needing a group of staff. It pays a lump sum only, has no surrender value, and must end before a set age.

Is it better to pay personally or through the company?

It depends on your tax position, but a company-paid relevant life policy is usually funded from company money rather than from income already taxed as salary or dividends, and it is not normally a benefit in kind. Because it is written in trust, the benefit is generally paid to your family free of income tax. An accountant can confirm the position for your particular setup.