What Is Group Life Assurance? Do We Need It? How Much Does It Cost?

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26-06-2020

Group Life Insurance (also known as Death in Service Insurance) is a popular employee benefit which pays a tax-free cash lump sum to your employees family or nominated beneficiary should they die.

  • Cover a multiple of your staff’s income, often set between 2 and 4 times basic salary
  • Claims are paid tax-free thanks to the trust set up with the policy
  • Premiums are usually considered a business expense and eligible for corporation tax relief.

Provide your employees with peace of mind knowing their loved ones have some financial support should they pass away.

The cash lump sum is often used to pay off an outstanding mortgage, cover funeral costs or help with everyday financial commitments.

Do We Need Employee Life Insurance?

Only 36.7% of people have some form of Life Insurance, making Group Life Assurance an invaluable benefit for the vast majority who lack any personal cover.

The Benefits For Employers

According to Investors in People…

  • Almost 20% of UK workers are unhappy in their job due to a lack of benefits.
  • 44% of UK employees consider company benefits to be one of the most important qualities that attract them to a new company.

Employees consider Life Cover one of the top five employee benefits they’d like to see at their company. Moreover, it’s also one of the simplest and cheapest employee benefits to implement.

Unsurprisingly, it’s therefore often the first step employers take to show employees that they’re valued.

Furthermore, an impressive employee benefits package can:

  • Attract new employees
  • Improve employee retention and engagement
  • Reduce stress and associated staff absenteeism.

The Benefits For Employees

In 2018, 42% of people without Life Insurance didn’t have it because it was too expensive.

Providing a group scheme for your employees shows them you care and takes a weight off their shoulders knowing their loved ones have some form of financial protection.

In addition to paying out on death there are a number of additional tangible benefits which are often provided for free alongside a Group Life Insurance policy:

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Can We Get Group Life Insurance?

To set-up a company life insurance policy you will need cover 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.

Relevant Life Insurance For Micro Businesses

For businesses without enough employees for Group Life Insurance, an alternative might therefore be Relevant Life Insurance, which is popular with contractors.

Relevant Life Insurance 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.

How Much Does Group Life Assurance Cost?

The cost of a Death in Service scheme varies depending on the workers you’re insuring. To get an accurate quote, you’ll need to do formal market research using your own employee data.

Details that will affect the cost of a policy include:

  • The level of cover you provide (e.g. multiple of salary)
  • Employees’ ages
  • The size of the group
  • Your industry and occupation
  • Where employees are usually based for work.

Although the cost of Group Life Insurance can vary considerably we have provided example pricing for two existing clients below.

If you would like us to compare quotes from all the UK’s leading insurers for your business pop us a call on 02084327333 or email help@drewberry.co.uk

.

Software Company

Health Service Company

Location

London

Barnsley

Employees

10

200

Cease Age

State Retirement Age

State Retirement Age

Level of Cover

4 x Annual Salary

1 x Annual Salary

Cost
Per Employee

£29.35 per month

£2.52 per month

Premiums correct as of February 2020

How Is Group Life Insurance Taxed?

Life Insurance for employees is generally considered a business expense, so premiums are typically eligible for corporation tax relief.

In addition, thanks to the trust structure set up alongside the cover (see below), employees’ loved ones don’t have to pay any tax on the payout, either.

Is Group Life Insurance A P11D / Benefit In Kind?

No, Group Life Insurance is not usually a P11D or a Benefit in Kind for employees. As such, there’s not typically any additional income tax for employees to pay.

Do We Need A Trust?

With Group Life Assurance, a trust is very important. It’s a legal arrangement the insurer pays the benefit into should an employee pass away. The scheme cannot start without a trust in place.

A trust keeps the payout separate from the business and, most importantly, sidesteps any inheritance tax issues on the payout for the employee’s family.

There are two ways to set up a Group Life Insurance trust: doing it yourself or using the insurer’s ‘master trust’.

Employer Established Trusts

  • Fully controlled by you, the employer, this is the most bespoke option.
  • You are responsible for all administration relating to the trust including registration with HMRC.
  • You will need to stay up to date with new legislation that could impact your trust.

While this option is the most tailored option, it’s also a lot of additional work and responsibility.

Master Trusts

Alternatively, most insurers already have ‘master trusts’ you can use. These are already set up so you don’t need to implement your own trust.

  • A master trust sees independent scheme trustees take care of trust administration. This includes reporting to HMRC, so you don’t need to worry.
  • Trust management is taken care of, including keeping up to date with trust law and dealing with claims.
  • However, this is a less bespoke option. You can’t therefore tailor it to your organisation’s needs.

Before opting for a master trust, we recommend you seek the appropriate legal advice. This is to ensure it’s right for your company.

Who Are The Top UK Group Life Insurance Providers?

Being independent we have access to all the top UK insurers. We do all the heavy lifting comparing quotes from the providers detailed below. Once that’s done, we’ll send you a personalised recommendation report summarising our research and laying out which insurer we think is best for you and your workers.

Policy Details & Additional Benefits
AIG
AIG offer competitive premiums with an innovative health and wellbeing app. Rated 4 / 5 stars on independent reviews website Trustpilot.
  • Free cover level: £1.25 million
  • Minimum lives: 3
  • Master trust: Available

AIG Benefits

  • 24 / 7 Telephone or Video GP Service
  • Mental Health Program
  • Online Fitness Program
  • Nutrition Consultations
  • Access to Best Doctors
Aviva
Aviva is a household name whose settlement of Group Insurance claims is among the fastest in the UK market.
  • Free cover level: £5 million
  • Minimum lives: 5
  • Master trust: Available

Aviva Benefits

  • Access to Best Doctors
  • RedArc Personal Nurse Service for claimants
  • 24 / 7 Qualified Counsellor Stress Helpline
Canada Life
Canada Life has 40 years’ experience in the group risk market protecting almost 3 million employees across 21,000 companies nationwide.
  • Free cover level: £1.25 million
  • Minimum lives: 5
  • Master trust: Available

Canada Life Benefits

  • Personal Nurse Service for Claimants
  • Second Medical Opinion Service
Legal and General
Legal & General is a household name offering competitive premiums with market leading rehabilitation support services. Rated 3.4 / 5 stars on independent reviews website Trustpilot.
  • Free cover level: £5 million
  • Minimum lives: 10
  • Master trust: Available

Legal & General Benefits

  • 24 / 7 Counsellor Telephone Support Service
  • Trained Nurse Medical Advice Helpline
  • Legal Advice Service
Metlife
MetLife is a global provider who are proud of their claims record, paying 99% of Group Life claims within 5 days and 80% within 3 days.
  • Free cover level: Determined by underwriting
  • Minimum lives: 3
  • Master trust: Available

MetLife Benefits

  • Up to six face-to-face counselling sessions a year
  • Telephone support helpline, 24 / 7 / 365
  • Practical probate support from trained legal consultants to help the relatives of a deceased employee deal with practical issues, from registering the death to managing the estate
Unum
Unum is a leading employee benefits provider, protecting more than 1.4 million people in the UK. In 2018, it paid claims worth £314 million.
  • Free cover level: £15 million
  • Minimum lives: 20
  • Master trust: Available

Unum Benefits

On a Group Life Insurance policy, Unum’s additional benefits are an optional extra for an additional premium. This gives you access to the insurer’s Help@hand service, including:

  • Remote GP Service
  • Second Medical Opinion Service
  • Mental Health Support Program
  • Physiotherapy Sessions

Where Does Company Life Insurance Fit In An Employee Benefits Package?

As mentioned, Group Life Insurance tends to be one of the first employee benefits introduced. This is because it’s relatively cheap yet employees value it highly.

The cornerstone of any good employee benefits package, Employee Life Insurance provides a solid foundation to introduce other benefits such as:

  • Group Critical Illness
    Pays a tax-free lump sum if an individual is diagnosed with a specified critical illness such as cancer, heart attack or stroke.
  • Group Income Protection
    Also known as Group Sick Pay Insurance, it works alongside your company’s sick pay policy to offer employees a monthly income if they’re medically unfit to work.
  • Business Health Insurance
    Pays for healthcare at private medical facilities. This offers your employees the best care exactly when they need it, reducing
    waiting times and potentially therefore getting them back to work faster.

Profile Pensions’ Employee Life Insurance Story

Here’s why Profile Pensions chose Drewberry to help with their Group Life Insurance…

Group Life Insurance Client Story

“Getting Group Life Insurance was a no-brainer. Our employees get comfort from knowing it’s there and we’re proud to provide that. We work hard to provide good benefits to our staff and show a commitment to our employees, so introducing an employee benefit was really a logical step.”
Michelle Donlin
HR and Office Manager at Profile Pensions

Setting Up Group Life Insurance: DIY Or Through An Adviser?

There are two main routes to set up a Group Life policy: doing it yourself directly with an insurer or working with an employee benefits adviser such as one of the team at Drewberry.

It’s essential you recognise the difference between these two approaches. This is because one offers you much more protection and support than the other.

The DIY Approach: Going Direct To An Insurer

Going directly to an insurer is classed as a non-advised sale. This means it’s all on you to ensure:

  • You’ve done thorough market research
  • You’ve negotiate the most competitive premium
  • You continually review your policy to ensure it remains competitive.

Most importantly, as you’ve personally made the decision to take out the policy with an insurer, there’s no regulated financial protection should the policy be wrong for you and your workers. This responsibility is on your shoulders.

Working With An Employee Benefits Adviser

On the other hand, working with an adviser is very different.

Not only do we take all the heavy lifting off your shoulders, from gathering data to researching insurers, but we give you the security of an advised sale.

Good advisers:

  • Undertake full market research for you
  • Use scale and experience to negotiate the best premiums
  • Offer ongoing support with claims
  • Review the market regularly to ensure you retain the best deal.

Above all, an employee benefits consultant from Drewberry offers you an advised sale. Not only do you therefore benefit from expert advice, you also get full financial protection should the policy turn out to be unsuitable.

If you need help don’t hesitate to pop us a call on 02084327333 or email help@drewberry.co.uk.

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Common Employee Life Insurance Questions...

  • What's The Difference Between Group Life Insurance And Individual Life Insurance?

    In some ways, there’s not much difference between Group Life Insurance and individual Life Insurance. This is, of course, apart from the obvious: group cover sees the employer pay rather than the individual.

    The main difference is that where the employer pays the premium they control the level and length of cover.

    • Your employer tends to define the level of cover you will receive, most commonly a multiple of salary
    • You will only be covered for the period of time you are employed — when you leave the company your cover will cease.

    Given these limitations it is important to still have suitable personal cover to protect a mortgage or other debts as you cannot assume you will always have Group Life cover.

  • Does Death In Service Insurance Cover Employees Working Abroad?

    Yes, employees are typically covered for both business trips overseas as well as holidays.

    Should you have employees who regular travel overseas or in work high risk areas it could impact yoru premiums and the the insurer who is most appropriate for your business.

    However, if you have employees regularly travel overseas for work to any areas deemed as high risk it could impact the cost and the insurer that’s best for your business. High risk areas might include, for example, areas with active conflicts, epidemics, terrorist threats or other dangers.

  • Does Group Life Insurance Cover Pre-Existing Conditions?

  • What Is The Free Cover Limit?

    Every policy has a free cover limit. This is also known as a free cover level or simply FCL.

    The free cover limit is essentially the maximum amount of cover each individual policy member can have before they’ll need medical underwriting (which involves answering medical questions).

    It’s usually set quite high, so only employees with the largest benefit need medical underwriting. In most cases it’s rare to exceed the FCL.

  • When Does Group Life Insurance End?

    Group Life Insurance ends when an employee:

    • Leaves the business
    • Retires
    • Reaches the policy cease age
    • Is made redundant.

    For this reason employees should not solely rely on their company-paid Life Insurance, there may well be a need for a personal life insurance policy to sit alongside their group scheme.

  • How Much Does Company Life Insurance Pay Out?

    While many firms choose to provide between two and four times the employee’s basic gross salary, this isn’t fixed in stone.

    Some businesses provide as much as 15 times annual salary. What you offer depends on your requirements and what is deemed competitive in your industry.

    You can also insure a director paid mostly in dividends for a fixed amount as their PAYE salary may be much lower than their actual take-home pay.

  • Are There Any Standard Exclusions?

  • Can You Cash In A Company Life Insurance Policy?

    No. Group Life Insurance policy has no real ‘cash’ value at any time. You cannot borrow from it or cash it in.

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Compare Group Life Insurance Quotes & Get Expert Advice

Setting up and maintaining a competitive Employee Benefits package can be a bit of a headache. We do the heavy lifting for businesses of all sizes throughout the UK so they can focus on what they are best at: delivering their own proposition.

We are here to help make sure your Group Life Insurance is set up in the most appropriate way whilst obtaining the most competitive premium.

Why Speak to Us?

We started Drewberry™ because we were tired of being treated like a number.

We all deserve a first class service 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.

Simply pop us a call on 02084327333 or email help@drewberry.co.uk.

The staff has been very knowledgeable and I have enjoyed working with Nadeem on setting up our plan.

Kim S
22/06/2020
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