Group Life Insurance (also known as Death in Service Insurance) is a key employee benefit that provides employees with a level of company paid life cover.
It pays a tax-free lump sum to the family or nominated beneficiary in the event of an employee’s death. The payout provides financial support during a difficult time, helping loved ones to pay off an outstanding mortgage, cover funeral costs or help with other everyday financial commitments.
- Covers a multiple of an employee’s income, generally between 2 and 4 times (although up to 15 times earnings is typically possible).
- Payouts are tax-efficient due to the trust set up with the policy, which avoids inheritance tax on the lump sum payment.
- Offers your employees peace of mind, knowing their family will have a lump sum benefit or dependant pension to support them should they die.
Why Is Group Life Insurance Important?
Just 36.7% of people have some kind of Life Cover, making company paid cover a valuable benefit for the majority of uninsured Brits.
Employees say Group Life Insurance is in the top five benefits they want their company to offer. It’s also one of the simplest and cheapest insurance products on the market.
An impressive employee benefits package can:
- Attract and retain the best workers
- Improve employee engagement
- Reduce stress and related absenteeism.
The Benefits For Employees
Cost is a big barrier to the uptake of individual term assurance. Offering group cover therefore not only shows your employees you care but also takes a weight off their shoulders. They know their loved ones have financial protection without them paying a penny.
Moreover, unless the level of benefit exceeds the free cover limit, staff are accepted without medical underwriting. This means pre-existing conditions are typically covered for most people, which may not be the case with a personal policy.
For many employers they want to provide their employees with peace of mind knowing their families would be financially secure should they die.
One of our clients Profile Pensions saw it as a no brainer, read the full story of why they set-up life cover for their employees here →
Are You Eligible For Group Life Insurance?
To set-up a company life insurance policy you will need at least 3 full time employees.
In addition these employees must meet some of the scheme’s common minimum requirements. For instance:
- Being within the minimum and maximum entry ages of the policy
- Having a UK working contract and being eligible to work in the UK
- Being an active employee at the company providing the insurance scheme.
Some employers add additional terms before including employees in policies. For example, this might include working for the company for a set period or being above a certain pay grade / status within the company.
Micro Businesses Should Consider Relevant Life Insurance
For businesses without enough employees for a Group Life policy, an alternative might therefore be Relevant Life Insurance, which is popular with contractors.
Relevant life cover is an employer-paid Life Insurance policy covering a single employee rather than a group. It does, however, have similar tax efficiencies to a group scheme given it is considered a business expense and claims are paid tax free.