Group Life Insurance

Blog written: 20/03/2024 

What is Group Life Insurance? 

It provides a business’s valued employees with a ‘death in service’ benefit. If an employee in the scheme dies, a lump sum will be paid to their beneficiaries. 

Why should a business consider Group Life Insurance? 

  • To enhance its employee benefits package. 
  • To attract high quality employees. 
  • They are simple to set up & administer. 
  • They are cost-effective so a perfect entry level benefit. 
  • Most employees don’t need to answer any medical questions. 
  • They are tax efficient. 
  • They can be set up on a stand-alone basis, outside of the current pension scheme. 

What does the business need to do? 

The business decides the entry criteria and the amount of cover the scheme will provide. If no current scheme exists, you can set the precedent for future employees joining the scheme. 

The business will decide on: 

  • The amount of cover which can be a multiple of base annual salary or a fixed lump sum.  
  • The entry & cease age of the cover i.e. the employee needs to be 18 to be included and they are removed from the scheme at their state retirement age. 
  • The length of service the employee needs to have to join the scheme. 
  • How often new entrants are added to the scheme i.e. once per annum on a certain date. 
  • The date on which salary increases are applied. 

What are the benefits? 

A huge benefit to Group Life Insurance is that they normally require no or minimal medical underwriting which allows most employees to access the life cover. For some employees, this may be the only life cover they are eligible for.  

Employees are covered regardless of the cause of death. They do not need to die whilst at work to be covered. 

From 2024-2025 tax year, the benefits from a Group Life Insurance policy will not count towards an individual’s Pension Lifetime Allowance (PLA). 

Who can be included in a Group Life Insurance scheme? 

  • Permanent employees 
  • Part-time employees 
  • Directors 
  • Zero hours contract employees 
  • Fixed term contract employees 
  • Temporary employees 
  • Equity partners 
  • Members of an LLP 

Anyone with a contract of employment can be included. 

What is the tax position on Group Life Insurance? 

Employers normally pay all the policy premiums, and the cost is usually treated for tax purposes as an allowable business expense. 

Premiums are not normally taxed as a benefit in kind on employees. 

The employee’s beneficiary will usually receive the life cover benefit free of inheritance tax as it is set up under a Trust. 

We always recommend that the business takes advice from their accountant or tax adviser. 

We hope you have found this blog informative. For more information on Group Life Insurance schemes or to make an appointment with an adviser, call us now on 01455 63 61 63.

The information contained within this blog was correct at the time of publication (20/03/2024), and is subject to change. 



More Posts

Why not try our podcast?

We release podcasts every week, click the button below to tune in now.

Client testimonials

See what our clients have to say about us! Use the arrows to navigate through our testimonials.