What is group life insurance?
Group life insurance, often referred to as death in service, is a benefit offered by many UK employers.
Essentially it’s life insurance which covers multiple people simultaneously and is usually funded by the employer.
If the worst were to happen, a tax-free pay out will be made to the family of the employee who has passed.
The value of the pay out will vary depending on the cover in place but commonly amounts to a multiple of the employees’ salary, e.g. 3x annual salary.
Whilst group life insurance is an excellent employee benefit, in most cases, it doesn’t negate the need for personal cover…
Group vs individual life insurance
The key difference between group and individual life insurance is the number of people the policy covers.
Group life insurance will cover multiple people under the same policy. It’s often paid for by an employer.
Whilst it’s a great workplace benefit, it expires if you leave the company.
Cover tends to be inflexible, with the same cover protecting everyone in the same way, but equally, no medical information is required, meaning that entry onto the policy is simple.
Individual life insurance, on the other hand, provides personal cover protection.
There are a number of options available, allowing you to choose the cover type that best meets your unique needs.
Usually, medical information is required for the application, meaning it can be a slightly longer process.
However, the key benefit of an individual policy is that it’s unaffected by any changes once the policy commences.
- Health & wellbeing
- Smoking status
- Most importantly in this scenario, your job role.
The cost of individual life insurance is calculated using the above factors, meaning if you require cover later on in life when leaving a company which provided death in service – you may experience high premiums.
Whilst at Reassured we don’t supply group life insurance; we do specialise in providing individual life insurance.
If this seems like a good option for you, contact our award-winning team to compare quotes, ensuring you receive the best deal.
The cost of group life insurance
The cost of group life insurance is predominately influenced by the number of members it covers, as it’s rare for any medical information to be required.
This differs from individual life insurance cover which takes into account your age, health and lifestyle factors.
It tends to be cheaper than individual life insurance and, in most instances, is paid for by the employer.
On occasions, employees will be required to make some contribution towards the cover.
How does group term life insurance work?
Group life insurance covers all employees of a company under a single policy.
Individual medical information is not required in most instances, providing the employee is under retirement age and fit to work when employment commences.
Generally speaking, group life insurance is paid for by the employer on behalf of their employees.
Protection tends to cover a 12-month period, at which point the employer makes another premium payment to allow the protection to remain in place.
The cost of this may vary year-to-year based on the number of employees that are protected.
If the worst were to happen to an employee, their loved ones will receive a tax-free lump sum for the pre-determined amount.
This is usually a multiple of their salary, for example, 3x annual salary.
Group life insurance requirements
No medical information is required for entry into a company’s group life insurance, however, there are some requirements to ensure you’re eligible.
You must be between the minimum and maximum age range as specified by the policy. This will vary depending on the company’s chosen provider.
You must also be eligible to work within the UK and have a UK work contract.
Finally, you must have an active role within the company and be able to work when the cover commences.
Advantages of group life insurance
Group life insurance comes with a number of advantages.
These can be divided into benefits for the employee and benefits for the employer.
The most obvious of the employee advantages is the financial protection such cover provides your loved ones if the worst were to happen.
Most group life insurance providers offer ongoing bereavement counselling for your loved ones too, to offer emotional support.
Finally, most group life insurance policies are automatically written into a discretionary trust.
This means that the pay out amount will be detached from your estate:
- Allowing you to avoid paying inheritance tax on the proceeds
- Avoid the lengthy probate process
- Specify exactly who you want to receive the money and when.
It’s also possible to write an individual life insurance policy in trust and enjoy the above benefits.
At Reassured, we offer a free trust writing service to help you make the most of your personal investment.
With regards to employers, group life insurance is a non-allowable business expense, meaning that to offer such benefit it won’t require you to pay additional tax.
It’s also a fantastic benefit to offer employees and future recruits, allowing you to attract better quality candidates for job roles, maintain employee satisfaction and increase staff retention.
Disadvantages of group life insurance
Whilst the list of group life insurance advantages may significantly outweigh a number of disadvantages, it’s important to take caution when only having group life insurance.
Unlike individual cover which will provide you cover for a specified amount of time; group life insurance only remains valid whilst you work in your existing company.
Therefore, if you change job roles, you may be offered a less attractive group life policy or nothing at all.
Your age and health significantly affect the cost and ability to obtain individual cover, therefore, if changing jobs, your older age may make individual life insurance unaffordable.
As a result, it’s always recommended to have individual cover in place as an additional safety net even if you have group life insurance offered through your job.
If looking to arrange individual life insurance cover, contact our award-winning team who can provide you with quotes from the industry-leading insurers.
Group life insurance statistics
In the UK, 12.1 million people have group life insurance in place.
29% of employees state that group life insurance is the most attractive benefit an employer can offer, above gym memberships, discount cards and other perks.
Despite this, only 13.7% of SME’s in the UK offer group life cover to their employees.
This highlights how offering such cover can attract better quality candidates, but also the need for individual cover as there is a strong possibility a change of employment could result in you not having cover.
Group term life insurance policy
Group life insurance is often referred to as group term life insurance.
Unlike individual term life insurance which typically lasts a number of years, group life insurance tends to be renewed annually.
This is to account for changes in the number of employees which require cover as the company grows.
The cover limit is unlimited, allowing the employer to cover anywhere from 10 employees to 600.
Unlike individual term life insurance which requires medical information to determine whether or not an application is accepted, and at what cost, group life insurance rarely requires medical information as long as all employees are fit and able to work when employment commences.
Group whole life insurance
Because group life insurance only remains valid whilst working for the employer who provides the benefit, group whole of life insurance doesn’t exist.
If you’re looking for a guaranteed pay out upon your passing, it may be you’re better suited to a personal whole of life policy.
Our team will walk you through the process and provide you with a number of quotes and all the information you need to make an informed decision.
Group term life insurance taxable benefit
When considering group life insurance, both employers and employees tend to question what tax implications come with such cover.
The good news is, neither will be subject to pay tax on this product.
Group life insurance is not a benefit in kind, therefore protecting the employee from paying additional tax for such protection.
It’s also a non-allowable business expense, meaning the employer is not required to pay tax on the policy.
Group life insurance rates
Relatively speaking, group life insurance is usually cheaper than individual life cover.
Regularly the cost is overestimated with 57% of employers presuming the price would far exceed the reality.
Often referred to as death in service, it’s a common misconception that you have to die at work for your loved ones to receive a pay out.
In reality, you just have to be under employment with the policy holding company when you pass away for your loved ones to receive a pay out, regardless of the cause of death.
Family group life insurance
Generally speaking, group life insurance is used to cover a workforce as opposed to an entire family.
However, if you/your spouse have group life insurance available through your employment, it may be possible to pay a bit extra to extend that cover to protect both of you.
Whether or not this is an option will depend on if it’s available through the policy your employer has in place.
Again, it’s important to remember that once employment ends, cover will cease and both of you will be left without protection.
As a result, it may be best to arrange personal joint term life insurance.
If looking to cover both you and your partner simultaneously, contact Reassured and we’ll provide you with multiple quotes.
Small business group life insurance
In the UK, only 13.7% of SMEs offer group life insurance, despite it being considered one of the most important employee benefits.
This highlights how small businesses can leverage such cover to attract candidates to join their business whilst also maintaining high staff retention.
Group life insurance can be arranged for a minimum of 10 people.
Therefore, the size of your business will affect whether or not this option is available to you.
Does group life insurance have a cash value?
Like most forms of individual life insurance, group life insurance has no cash-in value.
Relatively speaking, group life insurance tends to be cheaper than individual cover.
Similar to term life insurance, however, group cover has no cash-in value, meaning that any premiums your employer has paid into the policy are lost if you don’t pass away during the term.
Veteran group life insurance
Veteran group life insurance is a form of policy offered in the US to allow veterans to continue their life protection when they’ve finished serving.
Unfortunately, this is not something offered here in the UK.
However, if you’ve previously served in our armed forces, our post may help you understand the life insurance options available.
Top group life insurance companies
The best group life insurance companies will be based on what it is you’re looking for from the cover.
This could be:
- Amount of sum assured
- Fixed pay out or salary multiples
- Ability to add spouses and other family members
- Whether or not it is written in trust.
Cost and cover type will vary significantly between insurers, with some of the top UK group life insurance companies being:
Group life insurance quotes
Unfortunately, at Reassured, group life insurance isn’t something we currently offer.
However, as highlighted throughout this post, additional cover is likely to be beneficial, offering your loved one’s financial stability even if you were to change jobs.
The cost of life insurance varies significantly between providers and the younger you arrange cover, the cheaper your monthly premiums.
Why not use our award-winning and free to use broker service to obtain your no-obligation quotes today?