Reassurance for employees, protection for loved-ones.

What is Group Life Insurance?

Group Life Insurance is a policy taken out by businesses which provides financial compensation to an employee’s dependants (usually a partner or child) should they pass away.

You might also see it referred to as: Death in Service, Company Life or Employee Life insurance.

Group Life is one of the most cost-effective employee benefits to provide and one of the most popular amongst employers

Why provide Employee Life Insurance?

Put simply, to provide financial security to the families of your employees if they were to pass away.
It’s estimated that less than a third of people in the UK have individual life cover.

When you consider that there are an estimated 13.9 million dependent children and almost 11 million active residential mortgages
outstanding, you can start to appreciate the scale of the problem and the considerable risk to many families.

Many employers recognise these stark facts and Group Life Insurance represents an opportunity to remove the stress and worry from an already traumatic situation. Furthermore, a genuine investment in the wellbeing of an employee’s family goes a long way when trying to attract and retain the best calibre of staff.

"Managing our health and life insurance schemes used to be a headache but it is great to know that Engage are on the ball. I would highly recommend them to take the stress away."

Accountancy firm Sussex, 15 employees

Practical benefits of Group Life Insurance

It’s much less expensive than buying individual or family Life Insurance
There is often no medical questionnaires or underwriting to join the plan
It can cover
pre-existing conditions
It can be classed as a business expense
It is not classed as a Benefit in Kind (P11d)
Financial peace of mind for employees
Life cover for employees who might have been declined individually

How much does Group Life Insurance pay out?

It entirely depends on what you choose to offer. Most employers opt to pay out a multiple of the employee’s salary. The most popular option is to offer cover for either 2x or 4x the employee’s salary.

For example, if an employee earns £20,000 a year, and ‘Company A’ sets coverage for 4x the salary then the employee’s family stand to receive an £80,000 payout should the worst happen.

Some businesses offer up to 8x the salary. An alternative option is to stipulate a flat pay-out amount instead. 

It is also quite common for businesses to tier the benefits so that different categories of staff enjoy different benefit levels. 

In the event of a successful claim, life insurance is paid as a tax-free lump-sum to the nominated dependants.

What details are used to calculate the premium?

There is quite a bit of information needed for an accurate Group Life Insurance UK quotation compared to other employee benefits (such as health insurance). However, it should be information readily available to any HR team or finance department.

The following details are required for all employees:

  • Age
  • Gender
  • Location of work
  • Occupation (to account for any dangerous jobs!)
  • Salary
  • Details of any employees who are absent from work due to sickness
  • Details of any previous or current long-term absentees
  • Details of any employee who has suffered with a serious medical condition in the past 12 months

     

How much does Group Life Insurance cost?

All the above factors make it difficult to give an average Group Life Insurance cost point. But to give you an idea are some examples of Group Life Insurance premiums for different sized businesses and age ranges:

STAFF

2x salary benefit
Average age – 42
Salary roll – £150,000
Home Counties location
New to market with no long-term absentees
£500 total premium per annum

STAFF

2x salary benefit
Average age – 42
Salary roll – £300,000
Home Counties location
New to market with no long-term absentees
£600 total premium per annum

STAFF

2x salary benefit
Average age – 42
Salary roll – £1,200,000
Home Counties location
New to market with no long-term absentees
£840 total premium per annum

STAFF

2x salary benefit
Average age – 42
Salary roll – £3,000,000
Home Counties location
New to market with no long-term absentees
£2,064 total premium per annum

Frequently Asked Questions

Does “Death in Service” mean that employees must be at work when they die?

No – this is a commonly asked question and it’s understandable considering the term.  Employees do not have to be physically at work, they simply need to be actively employed by your company.

What is an Expression of Wish Form?

This is the form that an employee must fill in to indicate who will receive the payout in the event of their death. The employee must list their beneficiaries and declare how certain percentages of the benefit should be divided.

The form itself should be kept securely on file with the employers HR team and does not need to be shared with the insurer.

What is the minimum number of employees for Group Life Insurance?

Many insurers require at least 5 employees to qualify for Group Life Insurance. However, there are insurers who can cater for as few as two staff.

Does Group Life Insurance cover staff when abroad?

If your company has members of staff who are based in the UK but travel occasionally for work, these employees can be included under Company Life Insurance. Just remember to let the insurer know from the start!

If your company has numerous employees located in different parts of the world, it might be better to consider International Group Life cover.

Does Group Life Insurance cover pre-existing conditions?

Yes – there is no medical underwriting or questionnaires for employees under Group Life Insurance. This is one of its most attractive selling points.

However, you are required to notify insurers of any employee who has suffered with a major medical condition in the last 12 months or been absent from work for a significant amount of time. If any employee is suffering with a major medical condition when the plan is incepted, the insurer may require this member to be underwritten.

What is a Free Cover Level?

As there is no medical underwriting for employees under Group Life Insurance, insurers instead set a limit on how much an employee can be automatically insured up to. If it the desired payout is above that limit, the insurer will require medical underwriting.

In short: it’s the insurance company protecting themselves against the possibility of an astronomical payout!

For example, ‘Insurer X’ might offer a Free Cover Level (or limit) of £200,000 for a company with 30 employees. Let’s say the company taking out the insurance has selected a benefit which pays out 4x the salary for each staff member upon death. This means that an employee can earn a maximum of £50,000 per annum and join the scheme without any underwriting (4 x £50,000 = £200,000).

If an employee earns more than £50,000 and therefore has a benefit in excess of the £200,000 Free Cover Level, the additional benefit can only be insured if the member opts to be medically underwritten. If they choose not to be medically underwritten, they will still be covered for the £200.000.

What is the tax treatment of Group Life Insurance?

There is good news for both employer and worker.

Employer: The premium (the amount you pay to purchase coverage) is usually allowable as a business expense. This means you will be able to claim the premium as a business expense.

Employee: UK Group Life Insurance is not taxable as a Benefit in Kind, which means the employee isn’t taxed on the value of the premium from which they benefit. Also, the policy is held in a ‘discretionary trust’ which means that in the event of their death, the benefit paid will not form part of the member’s estate and therefore will not be liable for Inheritance Tax or Income Tax.

What is a Master Trust?

If your company has a Registered of Excepted Group Life Insurance scheme, it must be operated in conjunction with a Trust. The Trust is typically operated by a legal firm (appointed by the insurer) to manage any claims and process payment to the elected beneficiary.

Companies are free to set up their own Trust, however, this can be time consuming and costly. Instead, many choose to simply use the insurer’s Master Trust, which is provided free of charge and requires very little work to set up.

Group Life Insurance
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