How Much Does Group Life Insurance Cost Per Employee In 2021?

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26-02-2021

Group Life Insurance is an insurance policy that pays out a multiple of an employee’s salary to their loved ones should they pass away.

Also known as Death in Service it is a highly valued employee benefit. It offers your employees peace of mind, knowing that their loved ones will have financial support should the worst happen.

Given the cost of Group Life Insurance is relatively low — often much lower than you might think! — it’s generally one of the first benefits companies offer staff.

When speaking to businesses about employee life insurance the two main questions that tend to get asked first are:

How Much Life Insurance Should We Provide Our Employees?

How Much Will It Cost Per Employee?

Although each business is unique this guide should give you an insight into what impacts the cost of cover as well as monthly premiums per employee based on some example clients.

How Much Does Group Life Insurance Cost Per Employee?

The cost of Group Life Insurance depends on various personal factors about your staff, as well as some scheme factors which determine the coverage you offer.

Details that affect the cost of a Death in Service benefit include:

Employees’ Salaries / Level of Cover

Insurers pay a multiple of the employee’s salary if they pass away. Employees’ earnings, plus the multiple of those earnings you offer as a benefit, therefore have a major impact on the cost of cover.

Policy Cease Age

The age an employee will be when the policy stops covering them. This is often set to 65 / each employee’s state pension age, but you can set it as high as 75.

The higher the cease age, the greater the risk to the insurer of an employee passing away during the life of the scheme. That means higher premiums.

Your Industry / Job Titles

Some industries, and jobs within those industries (for example manual work or working at heights), are riskier than others.

If you’re in a riskier industry and have a high number of employees doing higher-risk activities each working day, you’ll likely pay more for cover.

Employees’ Ages

Older employees are more likely to pass away and trigger a claim. The older your workforce, the higher the cost of cover.

Group Size

While there are more people to insure the bigger the group, insurers often offer a discount for companies with a higher number of insured employees.

Employees’ Place of Work

Location matters because life expectancy differs across the UK. Employees living and working in some areas are less likely to die prematurely than those in other areas.

martyn coates, employee benefits consultant at drewberry

If an employee’s payout is under the scheme free cover limit, insurers don’t ask about their medical history. Those with health conditions therefore aren’t generally pricier to insure than healthy staff.

However, if they’re on long-term sick leave when you apply, the insurer will likely decline to cover them until they return to work.

Martyn Coates
Employee Benefits Adviser at Drewberry

Average Premiums for a Group Life Insurance Scheme in 2021

In the table below, we provide average premiums per employee for companies of various different sizes in various different industries. Each company also offers a different benefit with a different policy cease age.

Number of Staff

Benefit

Cost per Employee

Private Healthcare Provider

3,000

1 x salary to age 75

£3.16 per month month / £37.87 per year

Grocery Delivery Service

700

4 x salary to age 65 / state pension age

£5.18 per month / £62.20 per year

Education Provider

340

4 x salary to age 75

£8.82 per month / £105.84 per year

Solicitors Firm

185

3 x salary to age 75

£3.45 per month / £41.45 per year

Knitwear Manufacturer

80

2 x salary to age 65 / state pension age

£9.22 per month / £110.69 per year

Charitable Hospice

40

2 x salary to age 65 / state pension age

£5.84 per month / £70.03 per year

Golf Club

20

2 x salary to age 75

£5.46 per month / £65.45 per year

Tourism Board

10

3.5 x salary to state pension age

£15.72 per month / £188.58 per year

Engineering Firm

5

4 x salary to state pension age

£13.11 per month / £157.27 per year

Getting Personalised Quotes for Your Employees

The above table offers a rough guide to the cost of Group Life Insurance based on group size, benefit and policy cease. However, there are many other factors at play.

The cost of cover for you and your employees could therefore be very different, even compared to a similarly-sized company in a similar sector. For example, if you have an older workforce or offer your staff particularly good salaries, your costs might be higher.

Ultimately, the best way to get Group Life Insurance quotes tailored to your company is to speak to an independent expert. We have a team of regulated advisers who are on hand to provider fee-free advice to help get you the best deal on your employee life insurance.

 

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Frequently Asked Questions...

  • How Is Group Life Insurance Taxed?

    The tax position of Group Life Insurance actually makes it one of the most tax-efficient ways to offer Life Insurance.

    You as the employer pay premiums for each employee. In most cases, HMRC considers premiums eligible for corporation tax relief.

    When you set up the policy, you also arrange a trust with it. You either create a purpose-built trust just for your company or use the insurer’s more generic master trust. Read more about these two options here →

    Either way, the trust firstly receives the payout from the insurer if an employee dies. The trust then pays the money out directly to the people or the charity the employee wanted to give the funds to.

    This means the money doesn’t become part of the employee’s estate, so there’s no inheritance tax on the payout.

  • Is Group Life Insurance A P11D / Benefit In Kind?

    No, Group Life Insurance isn’t a P11D / benefit in kind.

    P11D benefits are those which employees must pay additional tax on if their workplace provides them. However, this isn’t the case for Group Life Insurance so there’s no need for employees to worry about it.

  • Are Premiums Discounted If We Pay Annually?

    Yes, some providers offer a discount if you can pay your entire year’s premiums in one go.

    However, this isn’t all insurers. Moreover, depending on the number of employees you have / the benefit you want to offer, it could be a large upfront expenditure.

    Discuss with your adviser whether the potential savings by paying your premiums annually make sense for your business.

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Compare Group Life Insurance Quotes & Get Expert Advice

As mentioned, the best way to get Group Life Insurance quotes exactly tailored to your business is to speak to an adviser, such as one of the team at Drewberry.

We’ll take some basic employee information from you, usually dates of birth, salary and workplace postcode, plus the benefit you want to offer them.

You don’t have to provide names at this point if you prefer. However, we do need this basic information as it heavily influences the overall cost of Group Life Insurance scheme.

Once you have sent us your employee data, we go out to every single UK provider and get quotes to find you the best deal.

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.

We are independent insurance advisers offering expert fee-free advice. Our comparison services gets Group Life Insurance quotes from every major UK insurer.

If you need any help at all, just pop us a call on 02084327333 or email help@drewberry.co.uk.

Really good service: prompt, efficient and helpful. Would definitely use Drewberry again.

Mark Bevan
16/05/2021
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