2 Mins
Group Life Insurance is considered a foundation employee benefit and is one of the most highly valued by employees and their beneficiaries. In this article we answer some of the most frequently asked questions that we get from our clients on Group Life Insurance.
What is Group Life Insurance?
Group Life Insurance provides a tax-free lump sum to an employee’s survivors if they die while covered by the policy.
How does Group Life Insurance work?
A one-off payment is provided upon the death of an insured person. This “sum assured” is paid directly to the trustees of the scheme to be passed on to the employee’s chosen beneficiaries, or it is directly paid to the nominated beneficiaries.
What level of cover is provided under the scheme?
This level of cover provided is dependent on an employer’s choice. Commonly these plans are set up using a multiple of salary or a by selecting a pre-determined amount.
The most common method is by selecting a multiple of salary, so for example if an employee is paid £30,000 and the scheme is set at a multiple of three times salary, the life cover payable on death is £90,000 (3 x £30,000).
When does cover cease under the scheme?
Cover will cease for a member on whichever of the following events is the first to occur:
- on ceasing to be employed by a company/employer insured under the policy
- on reaching the agreed cease age (in this case 65)
- on ceasing to satisfy any of the agreed criteria to be insured under the policy
- on reaching the end of a period allowed for a temporary leave of absence
- on ceasing to reside or work in a country where have agreed to provide cover
- on reaching the end of their contract of employment
- on reaching the cease age agreed for early retirement cover
- on reaching the end of the period allowed for redundancy cover, if this is provided (this is included in the scheme conditions)
How do I notify the insurer of my chosen beneficiaries?
By completing and returning the ‘expression of wish’ form to the employer. The employee’s form is held internally and in the event of a claim would be called on by the insurer.
Retirement Planning Guide
Are you nearing retirement but aren’t sure how to start planning? Download our free guide for pensions and investment advice.
Are the proceeds of the policy taxable?
No – as the plan is written under a discretionary trust, any benefits paid out are outwith the estate, and therefore tax-free.
Can I change the named beneficiaries?
Yes – they can be changed at any time by completing a fresh ‘expression of wish’ form, which would supersede any previous form, provided it has been dated.
Do I pay anything for this?
No – the cost of the scheme is fully met by your employer and is not deemed to be a “benefit in kind” by HMRC.
Do I have to provide any medical evidence?
Provided you meet the scheme eligibility conditions and join at your first opportunity, and your benefits fall below the free cover limit, no medical evidence will generally be requested.
Get in touch
If you have any further questions on Group Life Insurance or if you would like to enquire about how we could help set up a scheme for your business, please complete the form below and a member of our team will get back to you shortly.