Group Life Insurance

As you might expect from the name, this type of cover is like big a life insurance policy for a group of people employed at the same workplace.

Key points

• The business takes out the policy to cover its employees, often as part of a benefits package, although it can be standalone. There’s usually no cost to the employee as the employer pays the premiums on their behalf.
• If any of the employees covered by the policy lose their life or are diagnosed with a terminal illness while working for you, their loved ones will receive a tax-free lump-sum.
• How much is paid out depends on the level of cover agreed beforehand. Most lump-sums are a
• pre-determined multiple of an employee’s salary. Additional benefits, like spouse and dependent cover, can sometimes be added to policies.

How much will I pay?

Premium amounts depend on how many employees you’ve got. Usually the more you have, the less you’ll pay. Smaller groups of employees are often covered individually while larger groups are covered together with a ‘unit price’ per person, which might work out cheaper.

This is calculated based on your employee data, which you’ll need to provide every year.

Things to think about

• Premiums are classed as a tax-deductible business expense
• Employees usually have to be 18-75 to be covered
• If an employee leaves, the cover will stop for that employee

Important

Group life cover schemes can be registered or unregistered with HMRC. They’re dealt with differently and can potentially impact your employees’ pensions. It’s important to be aware of how each type of scheme works and think about which one would be the most beneficial for your employees.

Registered

Lump-sum payouts will count towards the member’s pension lifetime allowance (LTA). 

• The lifetime allowance for most people is £1,073,100 in the tax year 2023/24. In previous years, you would have paid a lifetime allowance charge on any pensions savings over this amount. But from 6 April 2023 that charge has been removed.

Different membership levels can be set for different employees.

Unregistered

Lump-sum payouts won’t count towards an LTA.

All employees in the scheme will have the same level of benefits (e.g. 5x salary).

To talk to us about group life insurance for your business, please get in touch.  You can call us on 01244 47010  or send an email to: info@moneytreewm.co.uk . Alternatively, give our pop-up form on the right of this page a try.

Tax treatment varies according to individual circumstances and is subject to change.