How Group Life Insurance Could Benefit You

Group life insurance, or group life for small businesses, is an insurance plan designed to pay out a lump sum of cash to the beneficiaries of an individual if they pass.  

It is a highly beneficial plan which comes with a number of advantages both for the employee and the employer, many of which aren’t available in individual life insurance plans. We’re here to outline group life insurance in terms you understand, and outline the unique benefits you’ll experience with such a plan. 

Understanding group life insurance and how it works

Also known as ‘death in service’, group life insurance provides a tax-free lump sum payment to the named beneficiary of the individual who passes away. This is usually family members, such as a spouse and/or children. 

It is designed to help these beneficiaries cope with the loss of the individual, as they transition to becoming financially independent. An important point to note is that this payout can be used as seen fit by the beneficiaries; this may include (but is not limited to):

• Paying off debts
• Rent/mortgage payments
• Funeral expenses
• Other financial obligations
  
  

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Types of group life cover

There are a couple of different types of group life insurance: 

• Excepted group life schemes – These policies fall under insurance legislation as opposed to pension legislation. This means that it does not contribute to lifetime pension allowance, removing the risk of exceeding that limit and getting taxed on it.
  
  
• Term vs permanent policies – A term policy is more common, and covers individuals for a specific period of time, or ‘term.’ This term is typically whilst the individual is employed by the company providing the insurance.  On the other hand, a permanent policy offers lifetime coverage, and often builds value over time on top of the death benefit. 
  
  
  

The benefits of Group Life Insurance as an employer

Provides cover for ineligible individuals

Group life insurance can actually help cover individuals who cannot get individual life insurance. This is because the application process for individual life insurance requires that you provide personal and medical information, which for unwell individuals can lead to difficulty being offered insurance.

The most common reasons for exclusions from life insurance eligibility are addiction problems, chronic/terminal illness, high cholesterol and poor health history – failure to disclose any of these things in your application could actually lead to you being ineligible for payout. On the other hand, group life insurance often only requires the name and age of each member of the group, meaning that it can be a very effective way to work around life insurance rejections. 

As a result, members of your team who may have been worried about their inability to get insurance may now be covered. 

Cost effective and tax efficient

Group life is a highly desirable benefit for an employer to offer, and it’s actually one of the most affordable too. Spreading the risk across a number of individuals means that the premiums on these policies are actually far cheaper per person. On top of this, premiums are usually regarded as a business expense, making them tax deductible, adding to affordability. 

Boosting employee morale and productivity

Group life insurance is a great job perk. It gives your team peace of mind that their dependents are taken care of if the worst were to happen, and they were to pass away unexpectedly. It also shows that, as an employer, you care about your team and the wellbeing of their families. This is likely to boost motivation and productivity, as well as employee retention. 

You could also consider offering private medical insurance, or corporate dental insurance too.  

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The benefits of Group Life Insurance as an employee

No medical underwriting 

A lack of medical underwriting (detailed health examinations or checks) means individuals who cannot get accepted for a personal life insurance plan may be able to get covered through group life insurance. So as an employee being offered group life insurance, you are able to attain a policy where you would’ve otherwise struggled to; allowing for peace of mind that your family or dependents are protected.

Essentially, group life insurance allows you to get life insurance when you might be denied for an individual policy. 

Tax free payouts with group life insurance 

Group life insurance lump sum payouts are usually exempt from inheritance tax as this money is not regarded as part of the deceased person’s estate. This means the value of the policy is maximised for your family, ensuring they get the entire value of the payout with no hidden cuts. 

Free coverage 

For the employee, coverage under a group life policy is (usually) free, and offered as a job perk. This allows for a valuable financial safety net at no financial strain to yourself. This typically only counts for basic coverage, but even optional increased coverage is available at a much cheaper rate through a group policy than through an individual one. 

Dragonfly Crowd can search a wide panel of insurers to find an insurance plan perfect for you and your business. Get in touch with us for more information, or to find a bespoke plan. 

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