Group Life Insurance (also known as Death in Service Insurance) 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 such difficult times, helping loved ones to pay off an outstanding mortgage, cover funeral costs or help with other everyday financial commitments.
Just 36.7% of people have some kind of Life Insurance, 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 policies on the market.
An impressive employee benefits package can:
Cost is a big barrier to the uptake of individual Life Insurance. 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 company Life Insurance 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.
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:
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.
For businesses without enough employees for Group Life Insurance, 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.
The cost of Group Life Insurance will depend on the extent of cover you want to provide and the demographics of your employees. Details that impact premiums include:
Check out the table below for a rough idea on the cost of cover, which we’ve based on the premiums of two recent clients.
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 | £29.35 per month | £2.52 per month |
As HMRC generally considers group life insurance a business expense, premiums are typically eligible for corporation tax relief.
Also, the trust you set up with the cover means there’s no tax on the payout, either.
No, it is not usually a P11D / Benefit in Kind. Employees don’t therefore typically need to pay extra income tax.
Yes, a trust is essential. It receives the benefit if an employee dies. A scheme can’t start without a trust, which keeps the payout separate from the business. Most importantly, the trust also sidesteps inheritance taxon the payout for the employee’s family.
There are two ways to set up the trust: the DIY approach or using your insurer’s ‘master trust‘. Read more on these two approaches here.
The main difference is that with a group scheme the employer pays the premium which puts them in control of the level and length of cover they choose to provide.
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 insurance.
Yes, employees are typically covered for both business trips overseas as well as holidays.
However, if you have employees who regularly travel overseas for work to any areas deemed as high risk it could impact the cost of your group life insurance 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.
In most cases, yes.
Unless your level of cover exceeds the free cover limit you will be automatically accepted onto the scheme without requiring any medical underwriting and pre-existing conditions being covered.
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.
We’re independent and have access to every UK insurer. We do all the heavy lifting, comparing quotes from:
Once we’ve got quotes, we’ll send you a personalised report summarising our research. This will lay out which of the top UK insurers we think is best for you and your staff.
In addition to the death benefit, there are a number of services insurers usually offer free with a policy:
Company paid Life Insurance tends to be one of the first benefits a company introduces. This is because it’s relatively cheap but employees really value it.
It also provides a solid base to introduce other benefits, for instance:
Here’s why Profile Pensions chose Drewberry to help with their cover…
“Getting Corporate 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 employees 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 a competitive benefits package can be a bit of a headache. We do the heavy lifting for businesses across the UK so they can focus on what they’re best at: delivering their own proposition.
We’re here to help you set-up and administer your employee benefits in the most appropriate way while achieving the best possible premiums.
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.
If you need help setting up group life insurance give us a call on 02084327333 or email help@drewberry.co.uk to speak to an expert adviser.
The staff have been very knowledgeable and I have enjoyed working with Nadeem on setting up our plan.
Or call us on 0208 432 7333
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