Why Death in Service Insurance?
Death In Service – also known as Group Life Insurance – pays a cash lump sum benefit should an employee die whilst in employment with your organisation.
Central to any good employee benefits package, it provides peace of mind for your employees and their families.
Additional benefits often include an Employee Assistance Program ❤ and Bereavement Service.
1 in 9 persons aged 20 years now will not live to reach their retirement at age 65. ONS life expectancy data 2012-14
What does Group Death Insurance cover?
Protecting your employees…
A Death In Service benefit is a very simple employee benefit paying out if the employee passes away whilst in employment with your organisation.
The policy would pay out irrespective of whether death occurs at work or not. For example, it could be as a result of an accident whilst on holiday or as a result of a long-term serious illness.
Each employee is covered for a multiple of their gross earnings which is determined by the business upon setting up the policy. The structure of the policy is flexible allowing different grades of employees to have different levels of cover usually ranging from 2 – 10 x gross salary.
How does Death in Service work?
An employee dies during their tenure with your company
The business assists the employee’s family in making a claim with the insurer
The insurer pays out the sum assured into trust (thus avoiding inheritance tax)
The business (as the ‘trustee’) pays the funds from the trust to the employee’s family.
Your Policy Options
Level of cover
The level of cover is usually set as a multiple of basic salary before tax, although fluctuating remuneration can be compensated for with some insurers.
Length of cover
Although group life cover is reviewable annually the plan can pay out at any point up to a certain age, which is usually set in line with the company’s retirement age.
Important! Schemes typically used to run until age 65, but with the removal of the fixed state pension age plans should now run until ‘age 65 or State Pension Age’, whichever is later.
Being independent group insurance advisers we pride ourselves on being the experts, knowing every insurance product we offer inside out and back to front. Here’s how we work…
The Fact Find:
We will talk you through the options available and capture vital information about the employees to be covered.
We go out to all leading death in service providers to gain the most competitive options available.
We email you a short report with pricing and insurer recommendations for the various options we’ve discussed. When you are happy to go ahead in many cases we are able to complete the application for you over the phone.
What is Death in Service?
A Death in Service policy is a group protection product. That means it’s paid for by the company for the benefit of the employees.
Death in Service Insurance protects your employees if they were to die while in service with your organisation. Should this happen, a cash lump sum payment is paid on death to help the employee’s loved ones financially at a very difficult time.
The typical sum paid out is between two and four times an employee’s gross salary, although it’s possible to cover up to 15 times salary if required. For directors who are remunerated largely in dividends rather than salary, it’s possible to cover them for a fixed amount rather than a multiple of salary.
Workers don’t have to be at work when they die; the death can happen anywhere, at any time, providing the individual is still working at your organisation and is below the policy cease age.
It is also commonly known as Group Life Cover and is an increasingly popular ‘first step’ on the ladder of employee benefits as it’s among the cheapest benefits to offer while still providing valuable peace of mind for your workers and their loved ones.
Rauri was easy to talk to. Explained everything really well. Took prompt action when requested and was in touch when he said he would be without being pushy.
How Does Death in Service Insurance Work?
- Death in Service Cover pays out a lump sum benefit of a multiple of an employee’s salary should they pass away during employment at the organisation.
- The payout is completely tax-free for the employee’s family thanks to the fact that typically the policy will automatically be written into trust from the outset.
- This trust is owned and controlled by the company, as is the policy, and the company also pays for it.
- However, the payout belongs to the employee’s family and is paid to them via a trust in the event of the death of the employee.
- As well as choosing the benefit – either a multiple of salary or on a flat rate basis – the employer gets to choose how long the benefit will be payable for.
- You may choose to opt to create tiers of death in service cover depending on the seniority of your workforce. Some businesses choose to offer senior staff a higher multiple of salary than more junior members, for example.
Setting Up Death in Service Insurance
To set up Death in Service benefit, you’ll need to collect detailed information from each employee and present these to every single insurer you compare the UK’s best Death in Service quotes. To get a fair premium representative of the whole market, we recommend you visit at least three employee benefits providers.
Get your HR team to collect:
- Employees’ salaries and the level of cover – we need this to work out how much you want to insure each individual for and therefore price the policy accordingly.
- Your industry and occupation – there are some occupations (e.g. manual work, working at heights or underwater) that are riskier than others, such as desk-based clerical jobs.
- Employees’ ages – older employees are more likely to claim on the policy.
- Age at which you want the cover to finish – the older this is set at, the more expensive premiums will be.
- The size of the group – although there are more lives to insure the bigger the group, insurers often offer a discount for larger group sizes.
- Where employees are usually based for work.
- If employees are actively at work currently – those off on long-term sickness at the policy’s inception are unlikely to be covered.
When you set up a Death in Service policy, you’ll need to collect all this information and send it across to every insurer in the marketplace if you want to get the best premiums.
Alternatively, you can just send this data to Drewberry once. We have relationships with all the leading insurers and have created smooth processes to go to the market on your behalf to obtain the best quotes for you before presenting these all in an easily-digestible report. This is entirely free and part of the service, so give us a call today on 01273646484.
Employee Benefits Consultant at Drewberry
Death in Service Insurance Benefits
Although it’s employees who get covered with Death in Service Insurance, there are benefits for both workers and employers alike.
Benefits of Death in Service Cover for Employers
- Almost 1 in 5 UK employees are unhappy in their job due to a lack of benefits.
- 44% of UK employees considered company benefits to be one of the most important qualities that attract them to a new company.
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, such as Death in Service Cover, 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.
Death in Service Benefits for Employees
Life Insurance is a popular benefit for workers. However, a recent Drewberry survey finding 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 Death in Service policy, as such policies aren’t usually medically underwritten unless you exceed the free cover limit.
This means any current medical conditions that could lead to adverse terms on an individual policy, such as diabetes, won’t be taken into account for the vast majority of employees covered by Death in Service.
Furthermore, with Group Life Insurance the policy is written into trust from the outset. The employer is the trustee, who then pays the benefit to the employee’s family should the employee pass away.
As a result of this setup, the benefit is automatically paid free from inheritance tax, whereas in an individual policy there is an additional step to write the policy into trust to ensure this.
Can We Get Death in Service Insurance?
The main barrier to entry for a Death in Service scheme is a minimum number of employees. Most providers require at least five employees for you to get cover, but some will accept as few as two employees.
Other stipulations include:
- Staff to be covered must be within the minimum and maximum entry ages of the policy.
- All staff must be eligible to work in the UK and have a UK working contract (although they can work abroad, providing their contract is UK-based).
- Staff must be an active employee at the company providing the insurance scheme.
In addition to the minimum terms imposed by the provider, some companies choose to add their own conditions. These include putting in place a minimum time period an employee must spend at the company before being granted cover, or the cover only being provided to those with a stated seniority (e.g. managers only).
Group Life Insurance for Small Businesses
If your business is too small for a full Death in Service policy, you may want to consider a product called Relevant Life Insurance. This is also known as Contractor Life Insurance because it’s frequently taken out by contractors working through their own limited companies and where they’re the only employee.
However, Relevant Life Insurance can be taken out for more than a single employee. There are similar tax benefits to a Death in Service scheme in that the policy is owned and paid for by the business and there is corporation tax relief available on premiums.
With Relevant Life Insurance, however, each member will need to be medically underwritten from scratch and in many ways it’s closer to an individual Life Insurance policy than it is a full Death in Service scheme.
Still, it offers the same level of cover and is still company-funded, so Relevant Life Insurance is often used as an ‘in-between’ option for smaller companies without enough staff for a Death in Service benefit.
How Much Does Death in Service Insurance Cost?
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:
- Employees’ salaries – given that the benefit is based on a multiple of salary. If you have many high-earning employees, you’ll likely face a higher Death in Service premium
- Your industry – certain industries require employees to take on risker roles (e.g. manual work, working at heights or underwater) than would be undertaken by the typical desk worker, so premiums will be higher in such industries
- Number of workers – while you might think that it would cost more to insure a larger group of people, in fact certain cases insurers will offer a premium discount for groups above a certain size.
Given that the price of Death in Service Insurance is based so heavily on the makeup of your workforce, it’s essential we collect the relevant information before we start.
While clients are sometimes rightly concerned about handing over confidential employee data, we can’t do our job to secure you the best premiums without it. We treat your data with the utmost respect and fully comply with the Data Protection Act, so you’ll never find it’s been leaked to third parties.
Health & Wellbeing Expert at Drewberry
How is Death in Service Insurance Taxed?
Life Insurance for employees is paid for by the company and the premiums are generally an allowable business expense for corporation tax purposes. It’s also not a P11D or a Benefit in Kind for employees – which means there won’t be any additional income tax you’ll have to pay as a result of being covered by your employer.
This is compared to an individual policy, where you pay for premiums out of income on which you’ve already had tax and National Insurance deducted. Plus, you’re paying for cover out of your own pocket rather than having the company cover the costs.
Group Life Insurance Trusts
The way Death in Service Cover is set up typically includes a trust from the outset. This trust is owned by the company and the Life Insurance is written into that trust.
As a result, in the event of a claim, the money is paid first into the trust before being distributed to beneficiaries. This intermediary step between the death of the employee and their loved ones receiving the benefit allows the bereaved family to sidestep any inheritance tax issues on the payment.
Given that Death in Service policies usually come with corporation tax relief on premiums and the payout, thanks to the trust, isn’t taxable either, Group Life Insurance is one of the most tax-efficient options for life cover on the market today.
How to Get the Best Death in Service Benefit
There’s no real ‘trick’ to getting the best Death in Service Insurance – it all involves studying the market and comparing premiums to make sure you find the best option for you. You’ll also need to consider the additional benefits on offer from the providers, such as counselling services, and factor this into your decision.
Key things to look out for…
- Successful claims
- Reputation of provider
- Clarity of policy wording
- Additional benefits
- Whether there’s a limit on the cover/number of people you can put on a policy.
Remember, when comparing Death in Service Cover…
- Higher premiums don’t always mean better cover
- Always compare the entire market, look for other options and don’t take the first quote
- Be accurate with all information you provide – if you’re not sure if something is relevant, ask an expert.
Of course, the easiest way to compare Death in Service Insurance quotes is to ask an expert, such as one of the Employee Benefits Consultants at Drewberry.
We’ll go to all the providers on your behalf and compare quotes from across the UK market before presenting our findings in an easy-to-understand report. To take advantage of this FREE no-obligation service, call us now on 01273646484.
Employee Benefits Consultant at Drewberry
6 Best Death in Service Providers 2018
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 Death in Service 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 paid 99.7% of Group Life claims in 2016. The Canadian company offers 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.
Ellipse was founded in 2009. Despite being a relatively new provider, it has since grown to insure more than 250,000 lives.
Ellipse’s Death in Service benefit includes an online nomination of beneficiary form and online medical underwriting, which can help speed up the application process.
Legal & General was founded in 1836 and is one of the oldest and most recognisable insurance brands in the UK. In 2016, the insurer paid 97% of all group claims.
With Legal & General workers get access to a substantial employee assistance program.
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.
What is the Free Cover Limit?
The free cover limit is the amount of Life Insurance that can be secured on an individual worker before medical underwriting is required. These limits are typically set high, so for most people being offered two to four times their salary they won’t have to submit any medical details to support their application.
Effectively, this can help get cover for those with pre-existing conditions or other factors that would likely increase Life Insurance premiums as an individual, such as being a smoker, on the same terms as a healthy individual. Individuals would likely struggle to get such favourable terms on the personal market, where applications are always underwritten.
For those who exceed the free cover limit, their applications will have to be medically underwritten. However, thanks to high free cover limits for Death in Service Cover, it’s usually only managers and directors with large salaries and therefore large benefits who need to be concerned with this.
Additional Benefits and Employee Assistance Programs
It is important to highlight that some insurers offer additional benefits with their products, which may not seem obvious when initially looking to invest in a Death in Service benefit.
- Counselling and bereavement services, either face-to-face or over the phone, for employees’ loved ones
- Telephone-based GP and nurse services
- Access to physiotherapy and other benefits to help employees back to work if they’re off sick.
When it comes to comparing Death in Service Insurance, it’s not just about looking at factors such as price and the free cover limit. You’ve also got to consider any employee assistance programs that come with the cover and work out how much value these will add to your business.
The free reports we produce on the various insurance options available to you will include a comparison of additional benefits so you can see how these might work for you. To take advantage of this free service with no obligations, call us today on 01273646484.
Employee Benefits Consultant at Drewberry
Get Expert Death in Service Advice
It can be difficult and time-consuming for an individual to get Death in Service quotes from every UK provider. However, it’s important that you do so to get the best premium.
Rather than doing all of this work yourself and potentially coming up against providers who only deal with intermediaries, why not make use of the FREE no-obligation service offered by Drewberry? We’ll do all the hard work for you. All you need to do is make one phone call to us on 01273646484 and we’ll sort the rest.
Employee Benefits Consultant at Drewberry