Group Life Insurance (sometimes referred to as a ‘standalone death in service’) pays out a lump sum benefit to an employees’ family or next of kin in the event of an employee dying whilst employed by your company. By providing Group Life Insurance to your employees, you can provide financial peace of mind for an employee’s loved ones in the event of the worst happening.
Here is what you should think about when implementing Group Life Cover:
Finding group life cover that is flexible may not only increase confidence for the business but could build trust.
For a business, this could mean choosing different levels of benefits for different types of employees. This means giving the same benefits to groups of employees, dependent on role or length of service. Or it may be more appropriate to offer the same level of benefits to all employees.
The industry average is typically 4x salary – however you can amend this depending on your budget and what other benefits you offer.
You may also consider using fixed sums assured, which can be useful for owner directors who may use a low salary supported by dividends.
You will need to choose a ‘cease age’, which is when cover will cease for certain employees when they reach the nominated age.
The most common cease ages are ‘State Pension age (SPA)’ or 70 years old. SPA is currently 66 years old and each employee’s cease age will be dependent upon their State Pension.
You will need to consider the demographic of your workforce when deciding on the cease age. Covering as many staff as possible is often desirable, however having a higher cease age which covers more staff will lead to a higher premium (due to potential greater risk to the insurer).
Each insurer will offer a ‘free cover limit’ which is the amount of cover an employee can have before any medical underwriting is required. The free cover limit can often be substantial (for example £1.25m for schemes with more than 50 staff).
This can be very attractive for bigger earners and an opportunity to achieve a considerable amount of life cover with no medical underwriting.
For smaller schemes, the free cover limit offered can vary between insurers. Therefore, whilst cost is important, sometimes is to worth opting for the higher free cover limit at a higher cost - particularly if you have several staff who will exceed this limit and require medical underwriting.
Employers can choose whether they act as a Trustee for the Group Life policy or whether they use a Master Trust (which means a third-party professional Trustee is responsible).
One of the main responsibilities of the Trustee is to distribute any benefits in the event of a claim. Some employers would like this responsibility, as they know their staff well and want to be able to use this knowledge for the best outcome.
However, for some employers this may be an additional burden which can sometimes become difficult – particularly if nomination forms aren’t completed or the member’s beneficiaries are not obvious.
Finding a policy that supports employees in life, as well as after death, may be a benefit to attract new talent and make current employees feel valued. Many policies offer additional support services as part of the policy. These additional support services can provide further care to your employees but also help you to enhance your benefits package. These include:
For help with the deciding on the best options for your employees CLICK HERE to get in touch