Group Life Assurance
Group Life Assurance
Group life insurance policies in the UK are usually taken out by employers to cover their workers, and are often provided as part of a complete employee benefits package.
Life assurance is paid for by the employer on behalf of the worker. Should a worker die, the aim is for a cash lump sum to be paid out to their next of kin.
In the UK, cover has historically been arranged as a multiple of salary. 2, 3 or 4 times salary are common multiples and cover can be provided at higher and lower levels. Many employers insure using a basic salary definition, however, total salary can also be used. Some cover is arranged using specified amounts, such as £50,000, £100,000 etc., but in our experience, it is far more common to find cover arranged as a multiple of salary, and often this is basic salary.
Where a company offers a flexible benefits scheme, an individual employee may be able to increase or decrease the amount of life cover they receive.
Cover is provided by Limited Companies, Limited Liability Partnerships, Partnerships and Charities for their workers. As the policy owner, the employer keeps the actual insurance policy. As with other types of life insurance, group life insurance allows the person cover to choose their beneficiary.
A “Nomination” or “Expression of Wish,” form should be completed informing the Trustees of the scheme of employee’s preferences, when joining a new employer offering this cover. This should be reviewed upon specific life changes. For example, when a member gets married or has children. Many employers are not proactive in reminding their workers to do this and we make an active point of reminding our clients at their annual review meetings to do this.
Directors, Partners and employees can all be insured.
It is also often referred to as Death-in-Service cover. This simply means that cover is provided whilst a person works for an employer.
It is worldwide cover in the normal life assurance sense. Some clients have asked us whether a person has to die on their premises in order for the cover to pay out! The answer is no. The cover is simply provided whilst a member is employed and if a member dies outside of their place of work, they are still covered.
In most cases, the cost of group coverage is far less than the members would pay for a similar amount of individual protection. So, if you are offered group life insurance through your employer or another group, you should usually take it, especially if you have no other life insurance or if your personal coverage is inadequate.
It is also not a benefit in kind. This means that employees and Directors don’t have to pay extra tax because they are being provided with this benefit.
So How is the Cover Arranged by the Employer?
Term insurance is the most common form of group life insurance. Group life is typically provided in the form of yearly renewable term insurance. When group term insurance is provided through an employer, the employer usually pays all of the premium.
A particular advantage of group cover is the availability of a Free Cover Limit. Some cover can be provided without the need for the members to have to answer medical questionnaires. The level of Free Cover and if it is available, depends on the number of people in an organisation to be covered.
The numbers vary from one insurance company to another. Generally Free Cover starts to be offered when four people are covered, although there are providers who will offer limited cover up to £100,000 per person for two people and upwards.
We have employers with 15 people covered who are all within the Free Cover Limit.
If some members are to be covered for particularly high amounts or amounts over the Free Cover Limit, then they may be asked to complete a medical questionnaire for the extra cover and could be asked to attend a medical.
It is usual for premiums to be calculated at the start of the year and then again at the end of the year. Rebate or extra premium situations.
What About the Administration?
Many employers are surprised that insurance companies don’t need to be updated about new entrants to the schemes on a daily basis.
As long as the policy has been set up to allow new entrants on a daily basis, new employees will automatically be covered without the need to inform the insurer.
Administration is not too time consuming and the choice of paying for premiums on a monthly, quarterly or annual basis are available.
Most insurers operate a scheme year. When a new scheme is set up for the first time an employer will provide a spreadsheet showing the members details. We will supply a template that can be used and the information commonly required is;
- Date of Birth
- Salary (if benefits are salary related)
- Job title
- Work Postcode
At the end of the scheme year another membership spreadsheet will be requested and at this point the cover will be looked at.
If the number of people covered has increased, then a balancing payment will be required. If the number of people has reduced, then a refund will be paid to the employer.
Group Life Assurance is Changing
Expect the way this cover is provided to change significantly.
There is now a micro employer scheme available which has a very basic level of underwriting. The insurer automatically excludes people working in mines, at heights and who do more dangerous jobs, but once these basic requirements have been met, employers can just click and buy cover for up to £100,000 per person covered.
Another insurer asks for monthly or quarterly uploads of the membership spreadsheets. They adjust their premium just as quickly so that they are only ever charging an accurate premium. This avoids the need for balancing payments to be made at the end of the scheme year.
What Happens When Someone Dies?
This is always a sad time for employees and employers and the family of the deceased. Often the deceased employee will be a friend or work colleague and the loss will be felt by the remaining employees.
The employer will usually be notified quickly by the spouse or relative of their employee.
We are then usually contacted and will inform the insurance company and arrange for any forms to be completed.
Some insurers will ask for a copy of a death certificate, but this is not always the case. There are alternative ways that they can check that the death is real and that the claim is not fraudulent.
The insurer will ask for a recent copy of a payslip or a letter from the employer confirming that the deceased was an employee and confirming their salary details.
All the claims that our clients have made have been paid and quickly in a matter of days once all the information requested had been received.
How Can We Help?
We can help employers to set up a scheme for the first time. We can help you to decide on a specification of the cover you require, so that the cover provided best suits your company’s requirements.
We also advise employers who have existing schemes in place.
We conduct market reviews of all the insurers who will be interested in providing cover for you.
Most schemes come with a guaranteed rate for 2 years. We recommend that we conduct a market review of your cover every two years, to ensure that your cover is still adequate for your needs and that the premium you are paying remains competitive.
We are always happy to discuss your needs. If you would like more information about this or any of our other services, please feel free to contact us for a no-obligation discussion on 01298 214 191 and ask for William Annison, or alternatively email: email@example.com
136 Lightwood Road
Tel: 01298 214 191