Group life assurance for UK employers
A tax-free lump sum for an employee’s family if the worst happens. Cheap, simple, and the benefit your team already assumes you have.
Group life assurance is the benefit most staff assume they already have, and the one most small employers have never actually set up. It pays a tax-free lump sum to an employee’s dependants if that person dies while working for you. No medical forms for most of the workforce, no shopping around, and for a typical SME it costs less per head than the office coffee. We arrange group life cover for employers across the UK from our office in Northamptonshire, and we compare the whole group protection market rather than one insurer’s shelf.
What is group life assurance?
Group life assurance — sold by some insurers as group life insurance, and known to almost every employee as death in service — is a single policy an employer takes out over a defined group of people. If a covered member dies while still employed, the insurer pays a lump sum, normally a multiple of basic salary, to that person’s family. The employer owns the group life policy and pays the premium. The employees are the lives covered, and they pay nothing.
It is by some distance the most common employee benefit in the UK group risk market, and for a lot of lower and middle earners it is the only life cover they hold. That is precisely why it carries weight when you are attracting and retaining people: it is an insurance product your team understands without needing it explained twice.
How does group life assurance work?
You pick a level of benefit — commonly two, three or four times basic salary, sometimes a flat lump sum benefit such as £50,000 for every member. You define the eligible group, which might be all employees, or only directors, or only salaried staff. The insurer then prices the scheme on the group as a whole: ages, salaries, headcount and the nature of the work, rather than an individual medical questionnaire for every person.
Each scheme is given a free cover limit. Any member whose benefit sits below that figure is covered automatically. Only the handful of people above it need the insurer to underwrite them individually, and even then it is usually a short set of questions rather than a full medical. When someone dies, you make a claim through your adviser, the trustees receive the lump sum death benefits, and the money is paid out to the beneficiary the employee nominated.
Registered group life or excepted group life scheme?
This is the one genuinely technical decision, and it is worth getting right. Choosing between registered and excepted is not a coin toss, and there is no universally correct answer as to whether registered or excepted suits you — it depends on your people.
Registered group life
- Sits inside pension legislation and is HMRC-approved
- Simple to set up and simple to run
- Payouts count towards the member’s lump sum and death benefit allowance
- Fine for the great majority of employees
- Can create a tax charge for higher earners with large pension pots
Excepted group life
- Sits outside the pension regime, written under a separate excepted trust
- Payouts do not touch the death benefit allowance
- Assessed under relevant property rules for inheritance tax
- Usually the answer for directors and senior earners
- A master trust option removes the governance burden
Plenty of employers now run both: registered group life for the general workforce, excepted group life for the senior team. A master trust lets you do that without drafting and governing your own trust deed, which saves a great deal of administration.
What are the benefits of group life assurance for employers and employees?
For the employee, it is straightforward peace of mind: their family receives a meaningful sum, free of income tax, at the point they need it most. For the employer, the pull is threefold. It is visible, it is cheap relative to almost every other employee benefit, and it signals something about how you treat people that a fruit bowl does not.
The tax treatment helps too. Premiums paid on a group life scheme are normally treated as an allowable business expense and set against corporation tax, and the cover is not usually treated as a benefit in kind for the employee, so there is no P11D entry and no personal tax bill for being looked after. Compare that with a director paying for personal life cover out of already-taxed income and the difference is stark. As always, treatment depends on your circumstances and HMRC practice, so check the specifics with your accountant.
How much does group life cover cost?
Less than most employers guess. Pricing turns on the age profile of your workforce, the total sum assured, the industry you are in and the level of benefit you choose. For a young office-based team, four times salary cover can land at a very small percentage of payroll; for an older workforce in a manual trade it costs more. Rates are typically guaranteed for two years, then reviewed.
Any figure quoted online is illustrative only — the only number that means anything is the one an insurer puts in writing against your actual census data. Send us your headcount, ages and salaries and we will get a quote back from the market, including Aviva, Legal & General, Canada Life, Unum and the rest, in a few working days.
Who is eligible for group life cover?
Most schemes need a minimum of two or three members, though several insurers will now write very small groups. Cover normally runs to state pension age or a scheme-specific ceiling, and members must be actively at work when they join. You can cover everyone, or you can define a category — directors only, or a salary band — provided the definition is objective and applied consistently. Part-time staff are usually included on the same basis as everyone else.
New joiners are picked up automatically at the next renewal, so you do not need to tell the insurer every time somebody starts. Leavers drop off on their last day, which is worth flagging to anyone resigning, because they often believe the cover follows them.
What is the difference between group life and individual life insurance?
Individual life insurance is owned by the person, priced on their health, and continues for as long as they keep paying. Group life assurance is owned by the employer, priced on the workforce, and stops the day employment ends. One is portable and personal; the other is cheap, simple and conditional on the job.
The sensible answer for most people is both. Group life insurance provides a solid base layer that costs the employee nothing, and personal cover sits underneath it for the mortgage and the long term. Directors of small limited companies have a third option worth knowing about, a relevant life policy, which gives one individual company-funded, tax-efficient cover without needing a whole group scheme.
Can you cash out a group life insurance policy?
No. It is pure protection with no investment element and no surrender value, so there is nothing to cash in. If the employer stops paying the premium, or the employee leaves, the cover simply ends. Some insurers offer a continuation option allowing a leaver to take out personal cover without fresh medical evidence, and if that matters to your people it is worth asking for at outset rather than discovering it does not exist later.
What support services come with a group life assurance scheme?
This is the part employers routinely overlook. Most modern group life assurance schemes bundle wellbeing services that are available from day one, whether or not anyone ever claims.
Everyday health support
An employee assistance programme, virtual GP access and second medical opinion services, available to the whole workforce from day one.
Bereavement and probate help
Bereavement counselling for families, probate guidance and financial help for the household after an employee’s death.
Mental health support
Structured mental health support and counselling that does more for day-to-day mental wellbeing than most standalone wellbeing spend.
Those embedded features and benefits get used far more often than the policy itself. If you are already paying the premium, using the health and wellbeing package that comes with it is free value sitting on the table.
How group life fits with the rest of your group protection
Group life assurance is one of three group risk products. Group income protection replaces a proportion of salary when someone is signed off long term, which is the risk that actually happens most often. Group critical illness pays a lump sum on diagnosis of a defined condition, covering the gap while someone is alive but not working. Together they form a proper group protection package, and most employers build it in that order: death in service first because it is cheapest and best understood, then income protection, then critical illness cover if budget allows.
We will tell you honestly which of the three earns its place for your business, and which one you can leave for next year. That is a different conversation from being sold all three at once, and it is the one worth having.
Group life assurance, answered
What is Aviva Group Life Assurance?
It is Aviva’s own group life product, one of several large UK schemes available. We are not tied to any insurer, so we compare Aviva alongside Legal & General, Canada Life, Unum, Zurich and MetLife and recommend on price, free cover limit, underwriting terms and the quality of the support services attached.
What are the three types of life assurance?
Broadly: term assurance, which pays out if death occurs within a fixed period; whole of life, which pays out whenever death occurs; and group schemes such as group life assurance, which are arranged by an employer over a workforce. Group life cover is a form of term assurance written on a collective basis.
Is death in service the same as group life assurance?
Yes. Death in service is the phrase employees use, group life assurance is the phrase insurers use, and they describe the same arrangement.
How quickly is a claim paid?
Once the trustees have the death certificate and the completed claim form, payment is typically made within a few weeks. Having a current nomination of beneficiary form on file for every member is the single biggest thing that speeds it up.
Does the lump sum form part of the estate?
Written under trust, which is how these schemes are set up, the tax-free lump sum sits outside the employee’s estate and passes to the nominated beneficiary without waiting for probate.
Let us get you a group life quote
Send us a headcount, a list of ages and salaries, and the level of benefit you have in mind. We will come back with terms from the whole market, explain the registered and excepted choice in plain English, and set the scheme up for you. There is no obligation to go ahead.
This page is general information, not a personal recommendation.