Risk warning: A relevant life policy is a form of life insurance and typically has no cash-in value at any time; cover will cease at the end of the policy term. If premiums are not maintained, the policy will lapse and cover will be lost. Tax treatment depends on individual circumstances and may change in the future. This article is for information only and does not constitute financial advice.
Husband and wife companies, where both spouses are directors and shareholders of the same limited company, are common among small consultancies, trades businesses, and family-run firms. A relevant life policy works slightly differently when there are two directors to think about rather than one.
Quick Answer: Can Both Spouses Be Covered?
Yes. In a husband and wife company, each spouse who is a genuine employee or director can be covered by their own separate relevant life policy, each held in its own discretionary trust and paid for by the company. There is no joint version of this cover.
Illustrative Example, Not a Real Client Case
The scenario below is a simplified, illustrative example to show how the mechanics work. It isn’t based on a real client, and it doesn’t include specific premium or cover figures, because those depend entirely on age, health, insurer, and the amount of cover chosen, a qualified adviser can give you figures based on your own circumstances.
How It Works When Both Spouses Are Directors
In a typical husband and wife company, both spouses are usually employees and directors, which means the company can take out a separate relevant life policy on each of them, one policy covering one director’s life, with its own discretionary trust naming that director’s chosen beneficiaries. It isn’t a single joint policy covering both; each director’s cover, trust, and beneficiaries are set up individually, even though the company is paying for both.
Why Some Husband and Wife Companies Set This Up for Only One Director
Sometimes only one spouse takes out cover, often because one director’s income or role is considered more central to the business, or because the couple already has personal cover for the other. There’s no requirement that both directors take out a policy; it’s a decision based on what protection the company and the family actually need.
Considerations Specific to Husband and Wife Companies
Because both directors are usually shareholders too, it’s worth thinking through what happens to the company if one director dies, the relevant life payout goes to the deceased director’s beneficiaries via the trust, not into the company, so it doesn’t automatically help the surviving spouse keep the business running. Some couples pair a relevant life policy with separate shareholder protection cover to address that gap; this is a decision to make with a financial adviser rather than something to assume is covered by relevant life alone.
What to Check Before Applying
Because both directors in a husband and wife company are often also the only shareholders, it’s worth checking how the company’s cash flow supports two sets of premiums rather than one, and whether existing personal protection already covers some of the same risk. An adviser reviewing both directors’ circumstances together, rather than treating each policy as a separate, unconnected purchase, is usually better placed to spot overlaps or gaps than looking at each application in isolation.
Getting Advice for Your Specific Structure
Because shareholding splits, income levels, and each director’s role vary company to company, a relevant life policy for a husband and wife business is worth setting up with input from a regulated adviser who can look at both directors’ circumstances together.
Reviewing Cover Over Time
As the business grows or shareholding changes, for example if a couple takes on a third director or restructures ownership, it’s worth revisiting both policies rather than assuming the original setup still fits. A periodic review with an adviser catches situations where cover has fallen behind the business’s growth or where beneficiary details need updating.
How the Trust Works on Each Policy
Every relevant life policy is written into a discretionary trust from the outset, and in a two-director household that means two trusts rather than one. Each trust names its own trustees and its own potential beneficiaries, so the surviving spouse is normally a trustee of the policy covering the other. Getting the trustee appointments right at application stage matters more in a two-person company than in a larger employer, because there is no wider board to step in if one trustee dies and no replacement has been named. Many advisers suggest appointing at least one additional trustee outside the couple for that reason.
What the Company Should Be Able to Evidence
Because the company is meeting the premiums for both policies, the arrangement should look like a genuine employee benefit rather than a personal purchase routed through the business. In practice that usually means each spouse is a real employee or director drawing remuneration for an actual role, the cover is offered on a consistent basis, and the premiums are recorded properly in the company accounts as an employee benefit cost. Whether the premiums qualify for corporation tax relief is a “wholly and exclusively for the purposes of the trade” question that rests with the company’s inspector of taxes, so the accountant handling the accounts should be told the policies exist rather than finding them later.
Points Worth Settling Before You Apply
- Cover amounts for each director. The two roles rarely carry identical financial responsibility, so cover is often set at different levels rather than matched.
- Existing personal cover. Where one spouse already holds personal life insurance, some of the same risk may already be covered, and the company cover can be sized around it.
- Business continuity. A relevant life payout goes to the family, not the company. If the concern is keeping the business trading, shareholder protection is a separate conversation.
- Affordability across both policies. Two sets of premiums are an ongoing company cost, and cover lapses if premiums stop.
- Review trigger. Agree when the policies get looked at again, for example on a shareholding change or a new director joining.
Where Husband and Wife Companies Most Often Get It Wrong
The most common issue is treating the two policies as one decision made once. Shareholdings shift, one spouse moves to a part-time role, or the couple takes on a third director, and the original setup no longer matches the business. The second is assuming the payout will help the surviving spouse keep the company running, when the money is designed to go to the family through the trust instead. Neither point makes a relevant life policy the wrong choice for a two-director company; both are reasons to have the structure reviewed by a regulated adviser rather than left to run unchecked.