Can I put critical illness cover through my limited company?
Yes, you can put critical illness cover through your business, but the structure and tax treatment depend on the purpose of the policy and who it’s covering.
Business-Paid Critical Illness Cover: Key Options
Business Protection Critical Illness Cover
This is designed to protect the business itself - not just the individual.
Use cases:
- Key Person Cover: Protects the business if a key employee or director suffers a critical illness
- Shareholder Protection: Ensures remaining shareholders can buy out shares if one becomes critically ill
- Loan Protection: Helps repay business loans if a guarantor or key person falls ill
Tax Treatment:
- Premiums may be tax-deductible if the policy is for business continuity (e.g. key person)
- Payouts go to the business, not the individual
Personal Critical Illness Cover Paid by the Business
If you're looking to cover an individual (e.g. director or employee) with a payout going directly to them, this gets trickier.
Challenges:
- HMRC typically treats this as a benefit-in-kind, meaning the employee pays income tax on the premiums
- The business may not get corporation tax relief unless the policy is for business protection purposes
Alternative Strategy:
- Some directors opt to pay for personal critical illness cover privately, or structure it as part of a wider remuneration package
