Benefits of group life insurance

Group life insurance is one of the many employee benefits available for employers to offer their staff.  Other benefits include pension schemes, group income protection schemes providing a replacement income if an employee is off work long term and group medical insurance plans.

Life insurance is a valuable benefit to offer to your employees.  Providing their dependents with a tax fee lump sum in the event of your employee’s death can play a major role in helping you to retain good quality staff.  Death in service cover through a group life insurance scheme can also help you to attract high calibre people for your organisation.

Being a member of your company’s group life insurance scheme will provide financial peace of mind for your employees, safe in the knowledge that their loved ones will be financially secure in the event of their death.

The administrative savings offered on a group basis also make group life insurance an attractive proposition. The schemes are often far more cost effective than offering individual life insurance policies to employees.

An added benefit offered by many insurers is bereavement support at no extra charge, in an attempt to provide additional support at a difficult time.


How does group life insurance differ to life insurance bought by individuals?
Whilst life insurance for individuals and groups does broadly the same thing, group life insurance is a legal contract between a group of policyholders (often employees in a company) and the insurance company.  The employer usually pays the premium and agrees the level of cover whilst with individual cover the policyholder usually pays the premium and decides on the level of life insurance they need.

Are group life insurance policies subject to medical underwriting?
When you take out your own life insurance policy, the insurer will ask you to complete a comprehensive medical questionnaire to help them assess the risk of insuring you.  If you are young and healthy you are likely to be offered a much more competitive premium than if you are older and have a complex medical history. With group life insurance, the employer usually provides the insurer with a list of employees together with their ages, occupations and salaries.

The employer will agree with the insurer the level of life insurance to be offered and this is usually based on a multiple of income. In most cases the insurer will offer cover without the need for each individual to complete a health questionnaire. They may request that an employee attends a medical or write to their GP for their medical information if they are not 'actively at work' when the policy starts or if there are higher earners and their level of cover would therefore be higher than the scheme’s 'free cover limit', this is the level of cover the insurer is happy to provide without full underwriting.

Is group life insurance a type of term insurance?
Yes. Group life insurance is usually set up as term insurance which means that the policy will have an end date. In the case of group life cover the end date is usually the normal retirement age for employees. The policy has no investment element and when the employee leaves the company they will no longer be covered.

What advice would you give to HR Managers when they are selecting a group life insurance policy?
Some tips when researching group life insurance providers would be firstly to decide exactly what you want to offer to your employees – what level of cover?  Will all employees be offered the same multiple of salary?  Secondly, use an experienced financial adviser or employee benefits specialist like Endsleigh to research the policies on the market and recommend the most appropriate and cost effective insurer and policy for your specific needs. Thirdly, don’t cancel any existing cover before the new policy is set up and on risk.

Are death in service benefits taxable?
Most death in services or group life insurance schemes are written into trust.  The advantage of this is that in the event of an employee’s death, the lump sum is paid by the trustees directly to the employee’s dependents. This payment bypasses the employee’s estate and is therefore not liable to taxation.

Apart from peace of mind for the employees what other benefits can be gained by offering death in service?
Many insurance companies offer bereavement counselling for those affected by the death of a spouse, partner, parent or colleague. In addition, some companies offer a probate helpline to assist in administering the deceased person’s estate.

See what our group life insurance offers

Group life insurance is one of the many employee benefits available for employers to offer their staff. Other benefits include pension schemes, group income protection schemes providing a replacement income if an employee is off work long term and group medical insurance plans.