Group life insurance cover is a commonly offered benefit in many workplaces, but not everyone fully understands how it works or what it entails. It provides financial protection to the employees of a company, in the event of death.
In this article, we’ll help to answer:
What is group life insurance
How it works
The benefits for employers
The benefits for employees
How much it costs
Whether there are any exclusions
Talk to a life insurance expert today...
What is Group Life Insurance?
Group life cover is a type of insurance that gives protection to the employees of a company.
This is usually paid for on the behalf of the employer, offered as part of an employee benefits package. It pays out if an employee dies whilst employed by the company, which can be used to support their family and/or loved ones.
This is also known as death in service benefit.
es.
How Does Group Life Insurance Work?
Unlike other types of policies, your employer provides cover. When you die, a cash lump sum payment is typically paid out to your family/loved ones. The amount that is paid out is based on the terms of your policy and the level of cover chosen.
Most group life insurance policies are renewable and can typically cover an employee up to their state retirement age. It's important to note that if you leave the company providing the policy your cover may end automatically. This is where having your own cover can be beneficial to help ensure you still have cover in place.
Group life insurance is often more commonly known as a death in service benefit.
Please note: The insurance products offered by Cavendish Online have no cash-in value at any time. If you stop paying your premiums your cover will stop, your policy will end, and you will receive no benefit. If you have not claimed before the end of your chosen policy term, the policy will end, and no benefit will be paid.
If you are facing financial difficulties and can no longer afford your premiums, please contact your insurer as soon as possible to stop the plan from lapsing automatically. They may have a scheme that allows you to keep the cover.
Benefits of Group Life Insurance as an employer:
Employee care
Offering life insurance is a great bonus for employers – it shows that you care about your employees and are willing to take extra steps to protect them. Advertising this could also be handy for attracting or retaining talent.
Cost effective
It can be a cost-effective way to offer protection to your employees, as premiums are often lower than individual life policies.
Easy setup
It's often easier to set up and manage as this is taken care of by the insurer. This makes it a great option for companies with a large number of employees. In addition, fewer questions need to be answered.
Provides reassurance for your staff
If something were to happen and one or more of your employees lost their life as a result, you will have been able to provide them with financial stability. This can be a tremendous comfort to families who are grieving the loss of a loved one.
Benefits of Group Life Insurance as an employee:
Convenience
As an employee, you may find it helpful to have this type of policy, as everything is taken care of for you. This way, you don't have to worry about paying for the policy or making sure it's up to date.
Peace of mind
Having any kind of life insurance can provide peace of mind in the event of a death in the family. Not only will you have financial security, but your family/loved ones will know that they’re taken care of if anything happens to you.
If you die whilst employed by the company, the payout can help your family/loved ones with things like:
Daily living expenses, including food, utilities, and other necessities
Mortgage or rent payments
Education costs for your children
Debt repayment, such as loans or credit card debt
Emergency funds for unexpected expenses
Funeral and other end-of-life expenses
Added protection
If you already have a life insurance policy of your own, having an employer provided plan can help provide greater protection. It might allow you to reduce your cover, helping you save money on future premiums.
In most cases, it's wise to take your own policy, as your group life insurance may end if you leave your employer.
Read more: Can Changing Jobs Impact Your Life Insurance?
No medical needed
If you have a pre-existing condition, you may be able to get cover as most companies accept staff without medical underwriting. However, this will depend on the amount of cover you are requesting.
If your employer offers group life insurance, speak with them to find out the full terms and conditions of the policy. Or, if you're unsure about your own options for life insurance, speak to our experienced advisers.
How much does group life insurance cost?
The cost of group life insurance is usually covered by the employer, making it a cost-effective benefit for employees. However, the exact cost varies depending on factors such as the number of employees covered, the level of cover provided, and the insurance provider.
Generally, group policies are more affordable than individual policies because the risk is spread across a larger pool of people. However, it is not the same as a standard individual life insurance policy that you take out yourself, as it is tied to your employment and may end if you leave your job.
Is group life insurance taxable?
For employees, group life insurance payouts are typically tax-free, meaning your beneficiaries will receive the full sum assured. Though as an employee, the payout could be liable for inheritance tax, as it is considered part of your estate
Employers should be aware that premiums paid for group life insurance are usually considered a business expense and may be deductible for tax purposes.
Are there any exclusions?
Like any insurance policy, group life insurance may have certain exclusions. While these vary by provider, common exclusions may include:
Death due to suicide within a certain period after joining the policy
Death as a result of participating in high-risk activities or extreme sports
Death caused by illegal activities
Death due to undisclosed pre-existing medical conditions, depending on the policy terms
It's essential to review your specific policy terms to understand any exclusions that may apply. If you have any concerns, speak with your employer or insurer for further information.
Is there a maximum age for group life insurance?
Most insurers will have an age limit for cover under group life insurance policies. This age limit can vary depending on the insurance provider and the specific terms of the policy. Cover is usually provided up to a certain age, often around 65 to 70 years old.
Once an employee reaches this age threshold, they may no longer be eligible for coverage under the group policy. However, not all insurers follow the same guidelines, some may have higher or lower age limits.
Speak to the experts...
Give our advisers a call today.
Our team of friendly and professional advisers are on hand to help with any questions you may have regarding Life Insurance.
The advisers can also make recommendations tailored to your current situation and will research the market on your behalf, ensuring you secure the cover you need and supporting you every step of the way.
01392 436193
(Monday to Thursday 9am – 5.30pm, Friday 9am – 5pm)
Request a callback
