What Is Group Life Insurance?
Group life insurance (also called death in service or group life assurance) is an employer-funded life insurance policy that covers all eligible employees. If an employee dies while covered by the scheme, a lump sum is paid to their nominated beneficiaries.
The typical payout is between 2x and 4x the employee’s annual salary, though some employers offer up to 8x.
Benefits for Employers
- Attract and retain talent – Death in service is consistently rated as one of the most valued employee benefits
- Tax efficient – Premiums are a tax-deductible business expense and are not treated as a benefit in kind for employees
- No individual underwriting – Employees are automatically covered up to a “free cover limit” without medical questions
- Duty of care – Demonstrates the business cares about employees and their families
How Much Does Group Life Insurance Cost?
Group life insurance is typically very cost-effective for employers. Premiums depend on:
- Number of employees
- Average age of the workforce
- The multiple of salary provided
- Industry sector
As a rough guide, a scheme providing 4x salary for a workforce with an average age of 35 might cost 0.3–0.6% of total payroll. For an employee earning £40,000, that is approximately £10–20 per month – paid by the employer, not the employee.
Minimum Requirements
Most group life insurers require a minimum of 3–5 employees to set up a scheme. For smaller businesses with fewer employees, individual relevant life policies offer a similar tax-efficient alternative.
Free Cover Limits
Each group scheme has a “free cover limit” – the maximum cover amount per employee that is provided without individual medical underwriting. This is typically between £500,000 and £2 million depending on the scheme size. Employees needing cover above this limit will be individually underwritten.
Frequently Asked Questions
Employer-funded life cover paying a lump sum (typically 2–4x salary) to an employee’s family if they die while employed.
Typically 3–5 minimum. Smaller businesses can use individual relevant life policies instead.
No. Not a benefit in kind, so no income tax or NI for employees. Payouts are typically IHT-free under trust.