Your Questions Answered
Confused about cover? Discover the answers to some commonly asked questions
What is Group Life Insurance cover?
Group Life Cover is the most cost-effective way to provide peace of mind and financial security for the families of your employees.
Very similar to ordinary term-life insurance policies, a group life policy pays a lump sum when one of your employees dies before their normal retirement age.
The proceeds will usually be paid into a Trust in the company name, so the benefits can be passed to the family of the deceased employee free of inheritance tax.
The policy pays out even if your employee is not actually conducting business activity at the time of death. They might, for example be at home or on holiday when they die - the plan will still pay.
The premium for group schemes are reviewed annually and can change over time, so it's worth having an independent business protection specialist check the market every year or two.
Why Get Group Life Cover?
Group life insurance, otherwise known as 'death-in-service' benefit, is a standard offering for thousands of companies both in the UK and overseas.
So if you're not providing life cover as a core part of your benefits package, your business could be at a serious disadvantage when looking to attract and retain skilled staff.
More importantly, research shows that employers who provide death-in-service benefits are considered more engaged with the well-being of their employees, and this has a significant impact on staff morale.
The research, reported in Cover Magazine last year, showed that 59% of employees would feel more valued if their employer provided life cover, and 51% said it would actively improve their perception of the employer.
What's more, FT Adviser reported this year that 36% of people in the UK live with mental health difficulties - conditions which lead to increased absenteeism and reduced productivity.
But many employers don't realise that most Group schemes also include specialist support services, to help those with physical or mental health difficulties.
It's no secret that happier staff (in other words, staff who feel valued by their employer) are more productive and make fewer mistakes, so offering a death-in-service package can make a huge difference to the bottom line for many businesses.
How much cover does a Group Life Plan provide?
Group death-in-service insurance policies can be extremely flexible, providing different levels of cover to different individuals in the business.
As a rule, cover is provided as a multiple of the employee's salary before tax. The insurer you choose and the level of cover you want to offer typically provides options between 2x and 12x annual pre-tax salary.
In some circumstances, it may be more appropriate to consider individual Relevant Life plans as an alternative, or top-up, to a group life scheme. Relevant Life cover is a a tax-efficient individual life insurance plan which provides in excess of 20x a multiple of salary, dividends, bonuses and benefits combined. (see our Relevant Life page for more detail).
Which insurers are best for my company?
There's no 'one-size-fits-all' insurer for a group scheme because each considers risk differently. This means that your business location, industry sector, and the day-to-day activities might sway some insurers in your favour, with others shying away.
You'll also want to know what additional benefits and support services are on offer, so you know that the premium you pay is getting the best value for your business and your employees.
Independent, specialist business protection advice is key to getting the right group life scheme in place.
How does a Group Life Insurance Scheme Work?
The policy itself is owned and paid for by the business. The lives of your employees are underwritten by the insurer, the premium you pay being an average based on the age and location of your workforce.
Here's how the claim process works:
- Step 1: A staff member dies, either unexpectedly or as a result of a long-term condition.
- Step 2: The business submits the claim to the insurer, along with any supporting evidence (such as a copy of death certificate or medical report)
- Step 3: A lump-sum, equal to the value agreed when the policy is taken out, is paid direct from the insurer to a Trust setup for the business.
- Step 4: The money is then paid direct to the family of the deceased employees, usually free of inheritance tax.