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Why Group Life Insurance is an essential part of an employee benefits package

Group Life Insurance is also known as Death in Service cover. It enables an employer to provide a lump sum benefit in the event of an employee’s death to their family, children, or any chosen beneficiaries.

Death in service insurance is a life insurance policy which an employer takes out on behalf of their employees and is designed to pay out a lump sum to their beneficiaries in the unfortunate event of their passing.

As the employer, you take out the insurance and offer it to your employees as part of their employee benefits package. An employee benefit is a product or service which an employer pays on behalf of their staff.

The insurance normally covers the person during the time they are employed by your company, with the cover ending for that employee when they leave, retire, or reach the age specified in the policy as chosen by you.

How does it work?

Death in service insurance works in the same way as an individual life insurance policy in that if the insured person dies it pays out a pre-determined lump sum.

With a death in service insurance policy, the predetermined lump sum is paid to a trust. The trustees will then administer and make payments to, the beneficiaries (usually a spouse, partner or family members). This will take into account the deceased’s wishes previously expressed via their nomination form.

How much cover will my employees have?

The level of cover is usually based on a multiple of your employee’s salary or a fixed amount and it may also include bereavement support and counselling, and probate services although this varies by provider.

Cover can be provided for the entire workforce or a defined category of employees.

What are the benefits to the company?

Cover can usually be structured with rates that represent a very low percentage of payroll.

The premiums are usually allowable for tax purposes as a business expense.

Provision of a Group Life Insurance scheme goes a long way towards demonstrating an employer’s genuine care for staff welfare which encourages loyalty and demonstrated to staff that they are valued.

What are the benefits to the employee?

Premiums are fully paid by the employer and are not treated as a benefit in kind for income tax purposes.

Any lump sum benefit is usually paid outside an employee’s estate and therefore free from any Inheritance Tax liability.

A Group Life Assurance scheme provides peace of mind and reassurance and the sense that their employer cares for their welfare and that of their family.

Get in touch

To find out more about the benefits of Group Life Insurance for both employers and staff and for our help to arrange the best cover get in touch.


The information was correct at time of publishing but may now be out of date.

Wealth Management
Posted by Stacey Cole
30th March, 2021
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