Why your business should offer Group Life Insurance

Group life insurance often sits quietly in the background of an employee benefits package, but its impact can be profound. For many people, it’s the first - and sometimes only - life insurance policy they ever hold.

Understanding how it works, why your business should offer it, and where its limitations lie can help your employees make smarter financial decisions and help you strengthen your overall employee benefits strategy.

What is Group Life Insurance?

Group Life Insurance is a policy purchased by an employer (or sometimes an association) that provides life cover to a group of people under a single contract. Instead of each employee applying individually, the insurer underwrites the group as a whole. This structure makes the process simple, cost‑effective, and accessible - especially for workers who might struggle to obtain affordable cover on their own.

Most group life policies pay out a lump sum to a nominated beneficiary if an eligible employee dies whilst employed. The benefit is often expressed as a multiple of salary, commonly one to four times annual earnings, or as a fixed lump sum.

Why should your business offer Group Life Insurance?

From your perspective, as an employer, Group Life Insurance is a relatively low‑cost way to enhance a benefits package and support employee wellbeing. It signals that your business values its people and recognises the importance of financial security for their families. In competitive labour markets, it can also help attract and retain talent.

There are cultural considerations too. When employees know their families would be protected financially if the worst happened, it is likely to reduce stress and contribute to a healthier, more engaged workforce. Some employers integrate Group Life Insurance with broader wellbeing initiatives, such as Employee Assistance Programmes or financial education resources. Oftentimes, Group Life Insurance policies also come with ancillary benefits that support employees and add value to both the policy and the business’ wider employee benefits package.

Key advantages for employees

Group Life Insurance offers several meaningful benefits:

• Automatic eligibility: Most employees are covered without medical exams or lengthy questionnaires. This is especially valuable for individuals with pre‑existing health conditions.
• Convenience: Coverage can begin automatically when employment starts or after a minimum service period.
• Baseline protection: Even a modest payout can provide crucial support for dependants—covering funeral costs, paying down debts, or providing temporary income.

For many workers, Group Life Insurance can serve as a financial safety net while they build their own long‑term protection strategy.

Limitations to be aware of

Despite its advantages, Group Life Insurance isn’t a complete solution for most people. The biggest limitation is that coverage usually ends when employment ends. A job change, redundancy, or long‑term illness can leave someone suddenly uninsured.

Additionally, the payout amount - often one to two times salary - is rarely enough to meet a family’s full financial needs. Mortgage payments, childcare, education costs, and long‑term income replacement typically require more substantial cover.

Common questions

What if I am sick and need to take some time off work?

Employees will usually continue to be covered, regardless of whether they are absent from work due to ill health or injury – providing they remain employed.

Am I allowed to have my own personal life cover in addition to this policy?

Yes.

Is it a Benefit in Kind?

No, premiums are not usually treated as taxable to the staff.

The verdict

Group Life Insurance is a valuable foundation. It’s accessible, affordable, and easy to manage. It provides peace of mind for employees and strengthens an employer’s employee benefits offering. But it shouldn’t be mistaken for a comprehensive personal protection plan. Employees who rely solely on group cover may find themselves underinsured or unexpectedly uninsured if their employment situation changes.

Nonetheless, treating Group Life Insurance as a starting point rather than the whole solution can help individuals build a more resilient financial future and is a worthwhile benefit to make available.

The information provided is for general guidance only and is not advice. Benefits, eligibility and tax treatment depend on your circumstances and the insurer/provider’s policy wording and schedule, which should be reviewed in full.