Group Life Insurance
Death-in-service cover
for your whole team.
Group life insurance, death in service, pays a lump sum to an employee's family if they die while working for you. Your company is the policyholder and pays the premiums; employees are covered under the scheme automatically.
It is the most widely provided employee benefit in the UK and generally the cheapest per pound of cover, because the insurer prices the whole workforce rather than each individual.
Covering one or two directors instead? Relevant life insurance may suit better →
What is group life insurance?
Group life insurance is a scheme an employer sets up to provide a lump sum to the families of employees who die while employed. The benefit is normally expressed as a multiple of salary, two, three or four times is typical, with some employers going higher for senior staff.
The employer owns the scheme, pays the premiums and defines who is eligible. Employees do not apply, do not pay, and generally cannot take the cover with them when they leave. They usually complete a nomination form saying who they would like the benefit paid to.
For employees this is often the only life cover they have. It is genuinely valuable, and it is also why advisers encourage people to check whether it would be anywhere near enough for their own household, since it ends the day the job does.
Registered vs excepted schemes
Registered schemes are the standard arrangement. The scheme is registered with HMRC and benefits are normally paid free of income tax through a discretionary trust, outside the employee's estate for inheritance tax.
Excepted group life schemes sit outside the pension regime. They are typically used for high earners or where the interaction between a registered scheme and an individual's pension protections would cause a problem. They have their own trust and tax considerations, including potential periodic charges on the trust.
Which is appropriate depends on the workforce and on individual employees' pension positions, so it is an advised decision rather than a default. Tax treatment depends on your individual circumstances and may change in the future.
How the multiple of salary is set
Most employers pick a multiple and apply it consistently across an eligible category. Two times salary is a common entry point; four times is a strong offering; some sectors use higher multiples for senior roles.
Two practical points are worth deciding early. First, what counts as salary; basic pay only, or does it include bonus and commission? Second, whether the scheme includes a dependants' pension as well as a lump sum, which some employers add.
Eligibility must be defined by objective category, all employees, all staff above a grade, all directors, rather than by naming individuals, because insurers need to avoid selection against the scheme.
Free cover limits and underwriting
The free cover limit is the level of benefit the insurer will provide without individually underwriting anyone. Below it, no employee answers a single medical question, which is what makes group cover so easy to administer.
The limit is calculated from the size and profile of the scheme. Employees whose benefit exceeds it are underwritten individually, which typically affects only a small number of high earners. If a member is not underwritten when they should have been, cover may be limited to the free cover limit at claim, so keeping member data current genuinely matters.
What it costs an employer
Pricing reflects the number of employees, their ages, the salary roll, the benefit multiple and the occupational mix. Group life is usually the least expensive of the group risk products, and for a young workforce the annual premium is often lower than employers expect.
Premiums are normally an allowable business expense for corporation tax where they meet the wholly and exclusively test, and cover under a registered scheme is not usually treated as a taxable benefit in kind for employees. Tax treatment depends on your individual circumstances and may change in the future.
Cover Your Family is not FCA regulated and does not arrange schemes. A separate, FCA-regulated adviser will design the scheme, obtain quotations and handle the trust documentation, at no cost to your business.
Who needs it
You should consider group life insurance if…
- ✓You employ staff and provide no death-in-service benefit at all
- ✓You are competing for candidates against employers who offer benefits
- ✓You want a visible, well-understood benefit that costs relatively little
- ✓You have grown past the point where single-life policies are practical
- ✓Your existing scheme has not been reviewed or re-broked in several years
- ✓You want to reassure a workforce doing physically demanding or higher-risk work
Key benefits
Why it matters
Meaningful support for families
A lump sum, typically a multiple of salary, reaches an employee's family quickly at the worst moment of their lives.
Cheap per pound of cover
The insurer prices the whole workforce rather than each individual, which makes group cover far better value than equivalent personal policies.
Little or no medical underwriting
Below the free cover limit no employee answers health questions, so staff with existing conditions are covered on the same terms as everyone else.
Strong recruitment and retention value
Death in service is well understood by candidates and visible in a job offer in a way a small salary difference is not.
Normally an allowable business expense
Premiums can usually be deducted for corporation tax where they meet the wholly and exclusively test. Tax treatment depends on your individual circumstances and may change in the future.
Not usually taxable for employees
Cover under a registered scheme is generally not a P11D benefit, and benefits are normally paid through a discretionary trust outside the estate.
Key considerations
Things to weigh up before you apply
Group Life Insurancecan be valuable, but it isn't right for everyone in every situation. Cover is subject to underwriting, and a policy only pays out if it is kept up to date and set up correctly, so it's worth understanding the limitations before you decide.
- !The employer is the policyholder; cover normally ends on an employee's last working day.
- !Benefit above the free cover limit requires individual underwriting, and cover can be restricted at claim if that was never completed.
- !Eligibility must be an objective category; you cannot simply pick which individuals to cover.
- !A multiple of salary is often far short of what an employee's own household would actually need.
- !Excepted schemes have their own trust and tax considerations, including potential periodic charges.
- !Member data has to be kept current, or the scheme can be underpriced and claims disputed.
FAQ
Common questions about group life insurance
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