What is Group Life Insurance?

A group life insurance policy (also known as Death in Service cover) is a policy that provides employees with life insurance that is paid by the company that they work for. This policy will pay out in the event that the employee dies whilst being employed by the company, and in turn the employee pays out a cash lump sum to the deceased’s family.

How much would the employee’s family receive?

In most cases the employee will cover their staff for a lump sum that has been calculated on the salary they usually receive. Typically, this means that the lump sum that would be paid out is around 3-4 times the annual salary. However, in some cases, firms can choose to insure their employees for up to 10 times their annual salary, if they so wish.

Does death have to take place in the workplace?

No, although this kind of cover can seem as if the policy will only pay out a cash lump sum if you pass away at work, it isn’t true. A group life insurance pays out if the death occurs at home, or at work and with some policies also if the death takes place abroad.

What happens if an employee leaves the organisation?

If a member of staff decides to leave the company, in the majority of cases they will no longer be entitled to a group life insurance policy at the business they previously worked for, unless otherwise stated.

How much does a group life insurance policy cost?

For employers, taking out a group life insurance policy is relatively inexpensive, and can act as a good investment for retaining staff in a cost efficient manner. On average, a firm can expect to pay approximately £100-115 per employee each year if they provided a £100,000 life insurance benefit per member of staff.

However, probably the most comprehensible policy in the market at the moment is offered by Yu Life at just £4.99 per month per employee, and can be purchased for 5,10,50 or 500 employees.

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What benefits does group life insurance provide for employers?

Having this kind of policy in your workplace can be advantageous in a variety of ways. It is often considered an employee benefit to staff members and comes with tax breaks for employers. Other benefits include:

  • It classifies as a business expenses: a group life insurance is tax-efficient as under UK tax laws these premiums will typically qualify as a business expenses
  • Provides duty of care: you can reward your staff for the hard work they do for your company by giving a helping hand if they pass away whilst employed.
  • Attract the best staff: a life insurance policy is considered by many as a very valuable workplace benefit, and it can help you stand out from competitors
  • Encourages workplace productivity: if your employees feel cared for and appreciated, then this will have an impact on their focus and productivity at work.

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What benefits does group life insurance provide for employees?

A group life insurance policy can provide a multitude of benefits, such as:

  • Significant financial support: the lump sum paid out to the employee’s family members can be used in any way they wish, and can help to cover vital living costs after their loved one has passed away.
  • No inheritance tax: in most cases, the lump sum is exempt from this kind of tax as it typically will not form a part of a member’s estate
  • Emotional support: many insurers who provide this policy also provide bereavement support services to not only the deceased’s family, but also to other members of staff if they require it.
  • No additional taxes: this is because the premium will not be categorised as a ‘benefit in kind’.
  • Less stress: for many, purchasing an individual life insurance policy can be too expensive. Therefore, having this policy provided by a workplace can provide peace of mind.

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What does group life insurance cover?

Are you looking to find out more about getting a group life insurance policy that will cover your employees, or are you an employee or potential employee of a firm, looking to find out more about what a group life insurance policy would cover you for? We explain the vital points you need to know about this insurance policy.

How much cover is provided by group life insurance?

Your employee will stipulate the level of cover they will provide in the event that you pass away whilst employed within their organisation. In most cases, the level of cover provided will be a multiple of the employee’s salary (usually 3-4 times the salary).  This amount is then paid out to the deceased’s family members as a cash lump sum. This kind of cover is also known as a Death in Service benefit.

Does group life insurance only pays out if an employee dies in the workplace?

Yes, a group life insurance policy provided by an employer will pay out in the event of a death regardless of whether the staff’s death takes place in the workplace or out of it. The only possible exception may be if the death takes place abroad, as this level of cover can depend from insurer to insurer – some will still provide cover providing that they are an active employee at the firm (this includes business trips and holidays too).

Are there minimum requirements for employees to get group life insurance?

Yes, most insurers will need employees to meet certain minimum requirements before they can be added to this kind of scheme, such as:

  • They need to be an active employee of the firm (for example, those on long-term absence may be excluded from an insurer)
  • They need to have a UK working contract
  • They must be eligible to work in the UK
  • They need to be within the minimum and maximum entry ages of policy

Does group life insurance cover pre-existing conditions?

In the majority of cases yes, this type of policy does cover pre-existing medical conditions. It can usually be easier for a person with a pre-existing medical condition to get cover through a group life insurance policy as opposed to an individual policy as most policies do not require employees to be medically underwritten to obtain the cover.

This can work out particularly advantageous for policies who may have a pre-existing medical condition, as it can be far more expensive for them to get cover on an individual basis. It is also another reason why a group life insurance policy can be an attractive incentive for many potential employees too.

What happens if an employee leaves the company?

If a member of staff decides to leave a company where they are a recipient of a group life insurance policy, they will cease to be able to benefit from it once they leave the organisation. This benefit is only for people actively employed at the organisation. That may also mean (depending on the insurer) that those who are on long-term leave from a company could be exempt from the group life insurance policy.

Does group life insurance include other benefits?

Yes, a group life insurance will not only provide a lump sum to the deceased’s family once they pass away, but with most insurers, support services come as standard too. This includes bereavement services, which can be accessed by the employee’s family and provide vital support at a difficult time, as well as support for the employee’s colleagues.

In addition, the lump sum is also completely free from inheritance tax, due to the trust structure that is set up when the policy is put in place.