Group Life Insurance

A group life insurance policy is an extremely popular benefit usually offered by employers, providing peace of mind for employees and their loved ones. But exactly how do these plans work and what do they cover?

This article takes a closer look at group life cover to provide all the information you need and how you can find the best policy that suits yours and your employee’s circumstances.

If you’d like to discuss the benefits of group life insurance in more detail, give us a call on 0808 189 0463 or make an enquiry so we can arrange for an expert to get in touch.

They’re fully qualified to advise you on policies of this nature, and speaking to them won’t cost you a penny.

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Definition: What is a group life insurance policy?

Group life insurance is a fixed-term life insurance plan that, as the name implies, covers a group of people rather than just one.

It is generally used by an employer to provide death-in-service benefits for their staff. Normally, the premiums for group life cover are paid in full by the employer.

In the event of an employee’s death during active service, a lump sum payment will be made to the employees family or nominated beneficiary.

The benefit amount is generally agreed by the employer, as the owner of the policy, and is often taken as a multiple of an employee’s income (usually between two and four times their annual salary).

So, for example, if an employee earns £40,000 per annum and their employer offers a group life insurance scheme equivalent to three times annual salary, in the event of the employee’s death, their next of kin will receive a lump sum payment of £120,000.

What does group life insurance cover?

Group life insurance provides cover in the event of a scheme members death during the term of a policy. For employer-run schemes, the term of a plan usually runs until an employee’s normal retirement age.

If an employee leaves active service then their membership of the scheme will end and the cover will cease.

What is the key benefit of having group life insurance coverage?

The main benefits of having group life cover for an employer would be:

  • Attractive benefit package for recruitment and retention of key members of staff
  • Premiums usually qualify as an allowable business expense for tax purposes

The benefits for an employee would be:

  • Peace of mind for you and your family
  • Benefits remain outside of your estate for inheritance tax purposes
  • Most policies offer the option of either a lump sum or dependents pension, if preferred

How are the lump sum benefits of group life insurance treated for tax purposes?

In the main, the lump sum benefits from a group life insurance scheme are paid free of income and capital gains tax. Also, as they are typically written under the terms of a discretionary trust, the proceeds remain outside of your estate for inheritance tax purposes.

However, as most group life insurance policies are linked to company pension schemes, lump-sum benefits can count towards your overall lifetime allowance (currently £1,055,000 for 2019/20). Any pension benefits which exceed this amount are subject to a 55% tax levy.


What different types of group life insurance are available?

Group life cover is generally available on a fixed-term basis, rather than whole life insurance, on the expectation that an employee will leave the employer’s service at some stage, either voluntarily or when they reach retirement.

The benefits and features of group life insurance will vary slightly depending upon the provider. Some of these features include:

  • Free cover limitNo medical questionnaires are required up to a particular limit
  • Bereavement support – Offered to family members upon the death of a scheme member
  • Spouse and partner cover – Members can extend cover to include their life partners
  • Overseas employees – Covers scheme members who are based in a country outside the UK

If you’d like to speak to an expert about the different features available within various group life insurance schemes, give us a call on 0808 189 0463 or make an enquiry and we will arrange for an advisor we work with to get in touch.


How do I find the best group life cover providers?

Finding the best group life insurance provider can be a difficult task as each insurer will offer different premium rates, depending on their own internal criteria and actuarial analysis.

Other factors such as the type of industry your business operates in can also influence who may be able to offer the best type of cover for your needs.

This is where we can help. The advisors we work with already have a full understanding of this form of life cover and would be able to help identify the best provider to suit your particular circumstances.

If you get in touch we can arrange for an expert to contact you and discuss your requirements in more detail.


Can a small business have a group life insurance plan?

Yes, it’s certainly possible. Typically, a minimum number of five members are required for a group life insurance scheme, therefore, if your business employs more than five people you should be able to set up a policy.

If you employ less than this number, don’t worry! You can still consider setting up individual life policies for each of your employees on a case by case basis.

Give us a call on 0808 189 0463 or make an enquiry and we can ask for a life insurance expert to speak with you and help you decide what type of life cover best suits your needs.


What is unapproved group life cover?

Unapproved group life policies were introduced in 1989 following the introduction of earnings caps in relation to overall company pension contributions.

These types of policies became obsolete and were replaced in 2006 by excepted group life plans (EGLPs) which are a special type of group life insurance scheme generally used for high-earning employees as they can provide benefits above the lifetime allowance without incurring any tax charge.

If you’d like to know more about EGLPs get in touch and we can arrange for an expert to provide further information.


Speak to a group life insurance expert

Providing your employees with life cover through a group life insurance scheme is an excellent way to show a real duty of care as an employer. The advisors we work with can help you find a plan that best suits all of your requirements.

All advice is free and you’re under no obligation to make a purchase. Give us a call on 0808 189 0463 or make an enquiry to get started.

We'll match you with your perfect financial advisor

Save time and money with an expert who specialises in cases like yours

We'll match you with your perfect financial advisor

Save time & money with an expert who specialises in cases like yours.

We’ll match you with your perfect financial advisor – for free.