Death in Service – also known as Group Life Assurance – is a company Death Insurance policy that provides a cash lump sum to your employees’ loved ones should they die whilst in your employment. It is an increasingly popular ‘first step’ on the ladder of employee benefits as it’s among the cheapest insurances to offer.
Although it tends to be the first benefit offered by a company, Death in Service Insurance is not compulsory in the UK.
It’s not something you have to provide, but there are a number of benefits to having a company Death Insurance scheme paid for and administered by the business – and not just for employees. There are benefits for both workers and companies alike.
Meanwhile, the Chartered Institute of Professional Development reveals that 54% of people currently looking for a new job are looking for better pay/benefits, citing this as the main reason for their move.
Employee benefits can help attract and retain employees, improve employee engagement and even reduce absenteeism, especially when the cover comes with employee assistance programs (EAPs).
There are also tax advantages to offering Death in Service cover in the form of corporation tax relief on premiums.
Life Insurance is a popular benefit for workers. However, a recent Drewberry survey found that only around 1 in 3 UK adults had Life Insurance.
Cost is a major barrier to uptake, so having an employer pay for cover could be a major weight off many employees’ shoulders.
Workers with pre-existing medical conditions could also benefit from a company Death in Service policy, as such policies aren’t usually medically underwritten unless you exceed the free cover limit.
Death In Service policies are also written into trust from the outset so should a claim arise the benefit is automatically paid to the employee’s loved ones free from inheritance tax.
The first thing to consider when checking whether your company can take out employee Death Insurance is the number of workers you have – typically, you need at least five workers to be able to put a scheme in place.
Less than 5 employees
If your business is too small for full Death in Service, you may want to consider Relevant Life Insurance as it can be taken out for a single employee.
This offers similar tax benefits to Death in Service Insurance in that the policy is owned and paid for by the business and corporation tax relief is available on premiums.
Employees also need to be eligible as individuals to join the scheme, so you’ll have to check that:
Some employers add additional terms before including employees in policies, such as working for the company for a set period or being above a certain pay grade / status within the company.
You can set up company Death in Service Insurance so that senior staff members get a larger multiple of salary than more junior staff members if you so wish.
The cost of Death in Service Cover, like any group insurance scheme, will depend largely on the demographics of your workers.
Although there’s usually no need for medical underwriting, cost will still depend on the age of the workforce, for example. An older workforce will typically increase premiums due to increased risk.
Other major factors that will determine the cost of Group Life Cover include:
Death in Service Insurance for employers is generally considered a business expense, so premiums are typically eligible for corporation tax relief.
It’s also not usually a P11D or a benefit in kind for employees – which means there won’t be any additional income tax your employees will have to pay as a result of being covered.
In most cases, no. When the policy is set up correctly, the benefit is paid into a specially-drafted trust. As a business, you set up this trust before the policy goes live.
The money is then distributed from this trust to the employee’s family. This sidesteps any inheritance tax issues on the payout and means Death in Service doesn’t becomes part of the estate of the deceased employee.
As above, you need to have an appropriate trust arrangement in place alongside your Death in Service Cover to ensure the benefit is paid free from inheritance tax.
There are two ways to do this: You can set up and administer your own trust as a business or you can use an insurer’s existing master trust (where available).
Most insurers already have master trusts in place. These are already set up for you to us, so there’s no need for you to set up a trust of your own.
The administration of the trust, including reporting to HMRC and paying claims, is taken care of by independent scheme trustees.
Master trusts represent a less bespoke option, so it’s recommended you seek the appropriate legal advice before opting for the master trust route to ensure it’s suited to your company.
AIG took over Ellipse — which was a relatively new provider, founded in 2009 — in December 2018. This married Ellipse’s bespoke insurance services in the group sphere with the backing of international insurance giant AIG.
AIG’s Death In Service benefits include an online nomination of beneficiary form and online medical underwriting, which can help speed up the application process.
Aviva can trace its roots back to 1696, but the company as it is known today was formed via the 2000 merger of Norwich Union ad CGU PLC.
Aviva’s Group Life cover allows employees who are part of the scheme to add a spouse / partner to the policy. The employee assistance program on offer includes discounted gym memberships and access to a 24-hour stress counselling helpline.
Canada Life is a Canadian company offering life, health and disability insurances for both groups and individuals.
With Canada Life, employees’ families are provided access to bereavement and probate helplines after the death of their loved one.
Legal & General was founded in 1836 and is one of the oldest and most recognisable insurance brands in the UK. With Legal & General workers get access to a substantial employee assistance program that includes telephone counselling; cognitive behavioural therapy (CBT); telephone-based bereavement counselling; a legal information service; and medical information.
MetLife is the trading name of New York-based business The Metropolitan Life Insurance Company. It’s among the largest providers of insurance, annuities and employee benefits programs worldwide.
MetLife’s group life cover comes with a free bereavement and probate support for employees and their families, making up to six face-to-face bereavement counselling sessions available.
The Unum Group was formed in 1999 through the merger of Unum Corporation and The Provident Companies. Today, the company operates through three distinct business arms: Unum US, Colonial Life and it’s UK branch, Unum UK.
Unum offers a multiple of between 1x and 12x salary with one of the highest free cover limits on the market.
We are here to ensure you and your employees don’t miss out on financial security because appropriate insurances were not put in place. If you are looking for a Death in Service Insurance Quote we can compare pricing from all the leading UK insurers.
Our experts can help provide you with all the necessary information for you to make an informed decision. It will all be compiled into a free report laying out the most competitive options for your business.
We started Drewberry because we were tired of being treated like a number and not getting the service we all deserve when it comes to things as important as protecting our health and our finances. Below are just a few reasons why it makes sense to talk to us.
If you would like some help reviewing your existing Death in Service or are setting up a new scheme please don’t hesitate to get in touch.
Pop us a call on 02074425880 or email us at email@example.com.
Director at Drewberry
Martyn Coates from Drewberry provided an excellent service with prompt handling of any question that we asked him. I would highly recommend Drewberry for anyone wanting Insurance.