What is a Group Life insurance scheme?

Group Life Insurance or Death in Service provides an employee’s family with a simple tax-free payment if they die while being employed by the employer.

It is a simple and affordable workplace benefit that shows your employees you care, not just for them but for their families too. Put simply a truly valued benefit that helps to retain and attract employees.

How much does it cost?

Typically, Group Life Insurance can cost as little as 1% of your companies’ salary costs. It’s an affordable employee benefit and a deductible business expense.

Who is entitled to this benefit?

As the employer you would have control over the types of benefits you wish to provide to whom you wish to provide. You need to be clear on the eligibility of the policy itself at the beginning.

An Insurer can look to cover a wide range of employees, including permanent, part-time, directors, zero-hour contract, fixed-term contract and temporary employee.

When is death in service benefit paid out?

A death in service benefit is paid out if an employee passes away and is still working for the company in question at the time.

This doesn’t mean that the death must occur when they’re at work, or actively engaged in any work-related activity. Instead, it means that if they die and are still on the company pay roll at the time, a benefit will be made to the trustees of the scheme for this to be paid to the beneficiaries of the member.

How much is paid out if the employee dies?

The amount of death in service benefit paid out depends on the benefits in question.

You can look at either a multiple of salary – up to 10 times. For example, if you chose to cover an employee earning £25,000 by a multiple of four, their total benefit would be £100,000.

Or fixed benefits – You can set a fixed amount for all employees, regardless of their salary. For example, all of your employees could receive a fixed benefit of £100,000.

As an example, you may wish to tier the benefits per level of staff i.e. Directors, Managers etc and you may wish to restrict the scheme to all pension scheme members or have it open to all eligible employees.

There are multiple options which we can discuss with you when looking at the whole of market.

What is a Trustee?

Group Life Insurance policies are designed to work with discretionary trusts. There are several ways to set up a trust.

A ‘Discretionary Trust’ lets you put money aside for specific beneficiaries. The trust is managed at the trustee’s discretion – they will follow the trust ‘rules’ which states how and when the beneficiaries will receive the trust income. For Group Life Insurance, the trust income will be the claim payments as and when they are paid into the trust.

  • A trustee could be the organisation or people within your organisation.
  • Named Individuals
  • An independent third party

Alternative, insurers have their own pre-arranged Master Trusts. By joining a master trust, you will not have to make the decisions and follow the guidance as a Trustee. The Insurers Master Trust does all that for you – so you can provide valued benefits for your employees without the extra work of administering the scheme!

Are there any additional services alongside a Group Life Insurance scheme?

Depends on the Insurer which you proceed with however most have bereavement counselling for employee’s family and colleagues along with Legal support to help employee’s family with any probate issues.

For more information on Group Life why not request a call back with one of our experts who will be able to offer the best advise and tailoring your package to meet your business needs.

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