As a UK contractor - whether in IT, construction, engineering, or project management - you need life insurance tailored to your self-employed status. With 101,080+ contractors in construction alone, insurers understand contractor needs. We compare personal life insurance and can guide you on relevant life insurance for limited companies.
Unlike employees who may benefit from death in service, contractors must arrange their own financial protection. LifePro helps you find suitable cover whether you're a sole trader or limited company director.
Contractor life insurance isn't a special policy type - it's simply life insurance for self-employed professionals. Whether you're an IT contractor, construction contractor, engineer, or project manager, you can access the same life insurance products as employed individuals, with additional options like relevant life insurance if you run a limited company.
Two main categories of life insurance for contractors:
Personal Life Insurance
Individual policies purchased by contractors in their personal capacity. Available to all contractors regardless of business structure (sole traders, partnerships, limited companies). Includes Level Term, Decreasing Term, Whole of Life, and Family Income Benefit. Premiums paid personally (not tax-deductible). LifePro can compare personal policies from 50+ UK insurers.
Relevant Life Insurance
Company-paid life insurance for limited company directors and employees. Only available if you operate through a limited company (not sole traders). Premiums paid by company and tax-deductible as business expense. Can provide tax-efficient death in service benefit. Policy written in trust to avoid inheritance tax. Not currently arranged by LifePro but we can guide you on options.
Which type you need depends on:
Business structure: Sole traders need personal policies; limited companies can choose personal OR relevant life insurance
Tax efficiency: Relevant life insurance offers tax benefits for limited companies
Coverage needs: Personal policies more flexible for individual family protection
Budget: Personal term life insurance typically most affordable option
Most contractors choose Level Term Life Insurance as it provides fixed, predictable cover for mortgage protection and family financial security at affordable rates.
Do contractors need life insurance?
Whether you need life insurance as a contractor depends on your personal circumstances. If you have dependents (partner, children), a mortgage, or debts, life insurance is essential. Employed workers often get death in service benefits - contractors must arrange their own protection.
Key reasons contractors need life insurance:
No death in service benefit: Unlike employees, contractors don't get automatic workplace life insurance
Income replacement: Your family relies on your contract income which stops if you die
Mortgage protection: Ensure your family can keep the home if you pass away
Business debts: Protect personal assets if you have business loans or guarantees
Irregular income: Life insurance provides financial stability for your family when contract income is variable
High-risk occupations: Many contractor roles (construction, offshore, engineering) have occupational hazards
What life insurance can cover for contractor families:
Financial Needs Life Insurance Can Cover
Example calculation for contractor with family:
Mortgage balance: £250,000
10 years family living costs (£2,700/month): £324,000
Funeral costs: £5,000
Outstanding debts: £15,000
Total recommended cover: £594,000 (often rounded to £600,000)
High-risk contractor occupations that particularly need life insurance:
Construction contractors (working at height, heavy machinery)
Offshore contractors (oil rigs, wind farms)
Electrical contractors (high-voltage work)
Scaffolding contractors
Demolition contractors
Diving contractors
Even low-risk IT contractors working from home need life insurance if they have financial dependents - death can occur from illness, not just occupational accidents.
Life insurance policy options for contractors
Contractors can choose from five main life insurance types: Level Term (fixed payout), Decreasing Term (reducing payout for mortgages), Whole of Life (lifetime cover), Family Income Benefit (monthly income), and Relevant Life Insurance (company-paid for limited companies). Most contractors choose Level Term for comprehensive family protection.
Comparison of contractor life insurance options:
Contractor Life Insurance Policy Comparison
Detailed explanation of each policy type:
Level Term Life Insurance
Most popular choice for contractors. Fixed payout throughout policy term (e.g., £300,000 payout remains constant for 25 years). Covers mortgage (interest-only or repayment), family living costs, debts. Terminal illness cover included free. Maximum cover £1,000,000. Starting from 20p-a-day through LifePro. Ideal for comprehensive family protection.
Decreasing Term Life Insurance
Payout reduces monthly or annually throughout term. Designed to match repayment mortgage balance as it decreases. Cheapest life insurance option. Not suitable for interest-only mortgages or income replacement. Maximum cover £1,000,000. Starting from 20p-a-day. Best for contractors who ONLY need mortgage protection, no additional family costs.
Whole of Life Insurance
Lifetime cover with guaranteed payout whenever you die (not if). Pays out regardless of age at death. Much more expensive than term insurance. Used for funeral costs, inheritance planning, inheritance tax planning. Premiums paid for life. Maximum cover £1,000,000. Contractors often use for business succession planning or leaving legacy.
Family Income Benefit
Pays monthly income (not lump sum) from death until end of term. Example: 30-year policy, die after 5 years = 25 years of monthly payments. Income typically £1,000-£5,000/month. Ideal for contractors who are main/sole earner. Can be cheaper than Level Term for large coverage needs. Helps family budget month-to-month rather than managing lump sum.
Relevant Life Insurance
Company-paid policy for limited company directors/employees. Premiums tax-deductible business expense (Corporation Tax relief). Policy written in trust to avoid 40% inheritance tax. Provides death in service benefit. Cover based on income (typically 4-10x salary). Only for limited companies (not sole traders). Not currently arranged by LifePro. Very tax-efficient option for contractor limited companies.
Additional contractor insurance options:
Critical Illness Cover: Pays lump sum if diagnosed with serious illness (cancer, heart attack, stroke). Can be added to life insurance for additional cost. Helps cover lost income during illness. From 33p-a-day through LifePro.
Income Protection: Pays up to 70% of income if unable to work due to illness/injury. Monthly tax-free payments. Essential for contractors with no sick pay. Executive Income Protection available for limited companies. From 20p-a-day.
Over 50s Life Insurance: Guaranteed acceptance ages 50-85. No medical questions. £5,000-£20,000 cover. More expensive per £1 of cover. Suitable for older contractors or those declined for standard cover.
LifePro can compare all personal life insurance options and provide guidance on relevant life insurance for your limited company.
Contractor life insurance costs depend on your age, health, occupation risk level, smoking status, and policy details. Low-risk contractors (IT, project management) pay standard rates, while high-risk contractors (construction, offshore) may pay 25-150% more. Example: £150,000 Level Term (20-year) costs £5.30/month at age 30 for low-risk non-smoking contractor.
Factors affecting contractor life insurance premiums:
Occupation risk level: IT contractor (low risk) vs. scaffolding contractor (high risk)
Age: Younger contractors get cheaper rates (exponentially increases with age)
Smoking status: Smokers pay 50-150% more than non-smokers
Health: Medical conditions increase premiums (25-300% loading)
Weight/BMI: Obesity can add 25-100% to premiums
Cover amount: More coverage = higher premiums
Policy term: Longer terms = higher total cost
Policy type: Decreasing Term cheapest, Whole of Life most expensive
Example contractor life insurance pricing by age (£150,000 Level Term, 20 years, low-risk occupation, non-smoker, good health):
Contractor Life Insurance Pricing by Age
Occupation risk categories for contractors:
Low Risk Occupations (Standard Rates)
IT contractors, software developers, project managers (office-based), design contractors, consultants, accountancy contractors. Office environment, desk-based work, no hazardous activities. Pay standard life insurance rates.
Medium Risk Occupations (+25-50% Loading)
Site-based construction managers, electrical contractors (standard voltage), plumbing contractors, joinery contractors. Some physical risk but not extreme. May require specialist insurers.
High Risk Occupations (+50-150% Loading)
Scaffolding contractors, roofing contractors, high-voltage electricians, offshore contractors, demolition contractors, diving contractors. Working at height, confined spaces, hazardous environments. Require specialist high-risk insurers. LifePro can access these specialist underwriters.
Ways contractors can reduce life insurance costs:
Quit smoking - saves 50-150% on premiums immediately
Lose weight if BMI over 30 - can reduce premiums by 25-100%
Shop around - premiums vary 30-70% between insurers for same contractor
Consider decreasing term if only covering mortgage - 20-30% cheaper than level term
Increase deferred period for income protection - lowers premiums significantly
Write policy in trust - no cost, avoids 40% inheritance tax for family
Apply younger - every year older adds 5-15% to premiums
LifePro compares quotes from 50+ insurers including specialist high-risk underwriters, ensuring contractors get the most competitive rates for their specific occupation.
Relevant life insurance for contractor limited companies
Relevant life insurance is a tax-efficient company-paid life insurance option for contractors operating through limited companies. It provides death in service benefits while premiums are tax-deductible business expenses, offering Corporation Tax relief and avoiding employer National Insurance contributions.
How relevant life insurance works for contractor limited companies:
Who Can Get It
Limited company directors and employees. NOT available to sole traders or partnerships (they need personal life insurance). Includes contractor limited companies with single director/employee. Can cover yourself as director or provide to other employees.
Tax Benefits
Premiums paid by company are tax-deductible business expense (19% Corporation Tax relief). No employer National Insurance (13.8% saving). No Benefit-in-Kind tax for employee. Policy written in trust avoids 40% inheritance tax. Significantly more tax-efficient than paying yourself salary/dividend to buy personal life insurance.
Coverage Details
Cover typically 4-10x annual salary. Term-based policy (5-50 years typically). Lump sum payout on death to family. Terminal illness cover included. Can be set up to pay out of trust (bypassing estate). Similar underwriting to personal life insurance.
Comparison to Personal Life Insurance
Relevant Life: Company pays, tax-deductible, no BIK tax, written in trust by default. Personal Life: You pay personally, no tax relief, may need separate trust setup. Relevant Life often more tax-efficient for contractors earning £50,000+ through limited company.
Example tax efficiency calculation for contractor limited company:
Relevant Life Insurance premium: £50/month (£600/year)
Corporation Tax relief (19%): £114 saved annually
Employer NI saved (13.8%): £83 saved annually
Total tax savings: £197/year
Actual cost to company: £403/year (£33.58/month)
Personal alternative: Would need to withdraw £900+ salary/dividend (after tax) to buy equivalent personal policy - significantly less efficient
Important points about relevant life insurance for contractors:
Policy owned by company, not you personally (but written in trust for your beneficiaries)
If you close limited company, policy ends (unlike personal policy you'd keep)
Can I pay for life insurance through my contracting business?
If you operate through a limited company, yes - via relevant life insurance. The company pays premiums as a tax-deductible business expense with Corporation Tax relief and no employer NI. If you're a sole trader, no - you need personal life insurance paid from personal funds. Relevant life insurance is very tax-efficient for contractor limited companies but isn't available through LifePro (we can guide you to providers).
Is contractor life insurance tax deductible?
Relevant life insurance premiums paid by your limited company are tax-deductible as business expenses, providing 19% Corporation Tax relief and avoiding 13.8% employer NI. Personal life insurance premiums paid by you individually are NOT tax-deductible. This makes relevant life insurance more tax-efficient for contractors earning £50,000+ through limited companies, though you'll need a specialist provider (not currently LifePro).
What if my contractor occupation is high-risk?
High-risk contractors (scaffolding, offshore, roofing, demolition) can still get life insurance but pay 50-150% more than low-risk contractors. LifePro works with specialist insurers who regularly cover high-risk occupations. You'll need to provide detailed occupation information. Some mainstream insurers may decline, but specialists understand contractor risk profiles. Don't give up after one decline - different insurers assess risk differently.
Can contractors write life insurance in trust?
Yes, contractors can write personal life insurance in trust. This removes the payout from your estate, avoiding 40% inheritance tax on amounts over £325,000, speeding up payout to family (bypassing 6-9 month probate), and giving you control over who receives funds and when. LifePro offers free trust writing service with most policies. Relevant life insurance is automatically written in trust.
Do IT contractors need life insurance?
Yes, if you have financial dependents (partner, children, mortgage). IT contractors often assume low occupational risk means no life insurance needed, but death from illness (cancer, heart disease) affects desk workers too. Without death in service benefits (unlike employees), your family loses 100% of income immediately. Life insurance for IT contractors is very affordable - £150,000 cover from £5-8/month at age 30.
Can sole trader contractors get relevant life insurance?
No, relevant life insurance requires a company structure to pay premiums as business expense. Sole traders need personal life insurance instead, paid from personal funds (not tax-deductible). If you want tax-efficient life insurance, consider forming a limited company (though don't do this solely for life insurance - there are broader tax implications). LifePro can arrange personal policies for sole trader contractors.
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Compare Contractor Life Insurance
LifePro helps UK contractors find affordable life insurance by comparing quotes from 50+ insurers including specialists who understand high-risk occupations. Whether you're an IT contractor, construction contractor, or work offshore, our team can find suitable cover. We provide free, no-obligation quotes and expert guidance. Life insurance for contractors starts from just 20p-a-day.
