Can a Sole Trader Have Business Protection Insurance?

Can Sole Trader’s Have Relevant Life Cover?

No, unfortunately not, but some providers will allow policies on PAYE members of the sole-traders staff. Relevant life cover is a death in service plan, providing a benefit to the employee’s family or loved ones via a trust. You are unable to have cover from a Relevant Life Plan if you are self-employed.


As you are self-employed you do not have an employer. Without an employer there can be no policy. Relevant life cover is a death in service plan from the “employer on the life of an employee but funded by the employer.” Zurich.


Can a Sole Trader Have Key Man Insurance?

Yes, however these are most often run as personal policies. As there is no legally distinct business entity owning the plan or paying the policy premiums, the policy is both set up and owned by the Life assured. This also means that it pays back to the owner of the plan or beneficiaries via trust. For this reason, a Key Man Insurance policy which is not technically owned by a business has essentially no tax benefits.

Instead the policy is tax neutral, the premiums paid cannot be deducted as a business expense but should the policy pay out, this amount is not taxable either.

To guarantee that the pay-out amount isn’t taxable it is best practice to write the policy into trust. The trust allows the insured to specify where the money is to go should they pass away.

My Business is Reliant on Contractors, Can I Take Key Man Insurance Out? 

This is a tricky one, to make sure that your business fits the criteria for the provider’s policy it is best to get advice from a business specific insurance broker. They will be able to asses your exact needs and check that you meet the providers’ requirements.

Basically this is possible, however where contractors’ contract or working term are of a short nature then the reality is that it is often overlooked as the business may survive without the cover. Often the Contractor will have Keyman cover themselves to ensure continuity of their work for your business.

If the business can provide enough reasoning to show that it will be financial affected if the contractor or non-PAYE staff member should die or get critically/seriously ill, then the policy can be put in place. The person the business is protecting with the ‘Key Man Insurance policy’ needs to be valuable to the business.

If there is minimal or no financial detriment to the business should that ‘key’ person die or get critically/seriously ill, then there is no real reason why the business should pay the policy premiums and put cover in place.

“Where the need exists that justifies putting the policy in place in the first instance, then they don’t necessarily need to be an employee” Zurich technical team

If you would like more information on anything that is mentioned above, please use the form below to contact a member of the team.