Employee Life Insurance

Many professional businesses offer employee life insurance (also known as ‘group life insurance’) as a staple part of their employees’ benefits package, which helps attract and retain talented staff.

The covid pandemic has made absolutely everyone, including the younger generation, much more fearful of what might happen to family or loved ones if they were to suddenly die.

Right now, more than ever, you’ll find your company offering to provide quality life insurance to your employees, especially those who have no savings or who can’t afford personal life insurance premiums, is a great incentive to work (or stay working) for your firm.

What is Group Life Insurance/Employee Life Insurance?

Group life assurance (also known as ‘death in service insurance’) is a type of term life insurance for employees, that is paid for by their employers and typically arranged by Human Resources (HR).

Should an employee die when they are still in your employment, a tax-free lump sum will be paid to your deceased employee’s closest relative or nominated beneficiary.

There are usually no clauses in the terms of a group life insurance company policy that states they have to be at their place of work when they die or that their death has to be work-related - employer’s liability insurance will cover this.

Having this type of business life insurance in place reassures employees that should the worst happen and they die unexpectedly, that their loved ones will have some money to fall back on. This money could be invaluable and help with financial burdens such as mortgage loans or funeral costs, utility bills or any other type of everyday expenses.

Sum assured

The company life insurance sum assured, guaranteed to pay out to the employee’s beneficiary should they die in your employment, is typically calculated by multiplying an employee’s income x 2, 3 or 4.

And for a business’s key person (most valuable) or long-term employees, the sum assured can be as much as 15 times their salary.

The lump sum payout is tax-free (i.e. no inheritance tax is payable unless you exceed your lifetime allowance of £1,073,100 - fixed until 2025/26 tax year) as the policy is set up as a trust.

Most employers arrange ‘group life cover’ for all of their employees collectively but you can choose to set up and pay for relevant life insurance if you only want to offer this benefit to one or two staff.

Group life schemes can sometimes be linked to an employee’s company pension and the policy term typically covers the years up to an employee’s state retirement age.

Eligibility

To set up a group life insurance policy you will need a minimum of *three full-time employees who will need to meet the following criteria:

• They must be a current employee working for your business.
• They should fall within the minimum and maximum entry ages for this type of insurance.
• They should be eligible to work in the UK / have a UK working contract.

If your business has less than three full-time employees, you can instead consider taking out relevant life insurance which is popular with self-employed contractors and freelancers.

Why does your business need Group Life Insurance?

• It’s one of the most popular benefits: According to a survey by Drewberry Insurance, company paid life insurance for employees is in the “top five benefits” they’d like their employer to offer and as stated above, is the number 2 benefit favoured by employees of UK start-ups.
• It can save your business money: Offering an overall attractive salary “package” of benefits is a cheaper alternative to offering a higher salary than your competitors and can usually be treated as a tax-deductible business expense.
• Match your competitors: A 2019 Corporate Adviser Workplace and Wellbeing Report revealed that life insurance is the benefit most commonly provided to employees by UK employers, providing cover for over 9.5 million people.
• Attracts and keeps the best workers: Offering this insurance as a benefit can help your business attract and retain top talent and give you an edge over your competitors. Employees highly value the convenience, cost-effectiveness and quality of this insurance because it’s typically a better quality product than they could afford to personally pay for and arrange themselves and they get it for free!
• Helps staff well-being: Your employees will feel more valued and secure, which can reduce stress-related staff absences by giving them peace of mind that should the worst happen, their family will get financial help. A study by financial wellbeing company, Neyber, revealed that employee financial worries are costing employers a staggering £15.2 billion a year; high staff turnover is costing an estimated £14 billion, increased absence (£478 million) and lost productivity (£516 million).
• Makes life insurance affordable to all: Only 36.7% of people in the UK have some type of life cover in place as most cannot afford the premiums, making group life insurance an attractive and welcome gift from a great employer.

How much does Employee Life Insurance cost?

According to aiglife.co.uk, the average cost of a £100,000 policy (say, for 2 x a £50,000 or 4 x a £25,000 salary) is approximately £100 per year, per employee. This is more cover for less money than what your employee would expect to pay if they were to arrange and pay for their own equivalent personal life insurance.

Factors you need to take into account and that will affect how much a policy will cost include:

Location

If your business is based in London the cost of premiums and the level of cover will typically be much higher than if your business is based elsewhere, especially up north.

Occupation and industry

If the industry your business is in (or the occupation of the employee you want to insure) is a dangerous one (i.e. involves manual work with dangerous machinery), then of course premiums will typically be higher. Whereas desk-based [low-risk] administrative jobs will attract lower premiums.

Employees’ salaries, volume and level of cover

How much cover you want to provide and for how many employees will have a significant impact on costs, as will the levels of employees’ salaries.

You should calculate how much of a budget you can allocate to a group policy to help you decide on the level of cover you can allocate to your employees (i.e. 2, 3 or 4 times or more an employees’ salary). Bear in mind that a large scale policy for a high number of employees will usually mean you’re offered a reduction in your premiums.

Employees’ ages

Older employees will cost more to insure as they will be more likely to make a claim.

Employees’ health

Whilst most group policies don’t require medical, it’s unlikely you will be able to get cover for an employee who is absent on long-term sickness at the policy’s inception date.

How Complete Business can help

Here, at Complete Business, we provide a professional, tailored insurance broker service to help you and your business source the very best group life insurance UK for your business and employees, for the best price possible.

Simply fill in and submit our online form and we will carefully assess and consider the very best group insurance policies and provide you with the most competitive quotes from reputable insurers, with no obligation to proceed with a purchase.