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9 Little Known Benefits of Group Life Assurance

May 30, 2024

Death in service. It doesn’t sound like a particularly cheery topic but, despite its reputation as one of the more ‘basic’ employee benefits, Life Assurance has more upsides than you might think.


As a HR Manager, you probably want to provide the kind of employee benefits package that will get employees talking. But you might not have the budget or board buy-in to implement the scheme of your dreams.  So, in this blog, we’re going to reveal nine lesser known benefits of the humble Group Life Assurance scheme.

(If you are struggling to get your board on board, check out our blog How to build a magnetic employee benefits scheme).


1. Group Life Assurance is one of the cheapest employee benefits

Ok, so you probably already know that Group Life Assurance is one of the more affordable employee benefits you can offer.

But did you know it’s also the most popular? According to analysis carried out by The Knowledge Academy’s on data from Capita, 34.5% of UK employees chose Life Insurance as the benefit they’d most like to see as part of their benefits package.

The lowest available benefit option is 1x an annual salary and the most popular options are 3 or 4x an annual salary.


2. Most Death-in-Service schemes come with complimentary benefits

Although life assurance is designed to pay a lump sum in the unfortunate circumstance of an employee’s death, lots of insurers now include added-value extras that employees can enjoy whilst they’re alive.

Of course they’re non-contractual so they can change from time to time, but here are some examples of complimentary benefits you can get with Group Life policies:

  • Savings and discounts
  • 24/7 virtual GP services
  • Funeral concierge service
  • Financial and legal guidance
  • Bereavement & probate support
  • Wellbeing content and resources


3. Save money on an existing EAP

Lots of group life schemes come with a free Employee Assistance Programme. So if you’re already paying for an EAP, replacing it with a group life policy that includes an EAP provides your employees with death in service benefits AND employee assistance. Without a huge increase in your costs.

At Macbeth, we’d always assess your existing EAP first to make sure you don’t lose any benefits. And because the benefits are non-contractual and can change, we recommend reviewing EAP benefits regularly.


4. It’s a tax-free benefit for employees

This one is super simple. Life assurance isn’t considered as a benefit in kind. Which means employees don’t pay any tax on it (even if it includes some of the other benefits mentioned in point 2).


5. You don’t have to navigate medical underwriting

For Group Life policies, insurers will apply a Free Cover Limit (FCL) based on the size of the insurance scheme. This is an automatic level of cover (AKA a maximum claim threshold) that’s included for all members of the policy. It simply means that members can claim up this amount without the need for any medical underwriting.


6. Payouts can also be based on salary + dividends

Life policies normally pay out a multiple of an employee’s salary or a pre-determined fixed lump sum. However, for directors and senior executives who take dividends as part of their earnings, the payout can also be calculated based on dividends plus salary. This is particularly useful if your directors are taking a lower salary that’s supplemented by larger dividend payouts.

If you choose this option, you just have to provide the insurer with an average of the previous 3 years’ earnings.


7. Avoid inheritance tax implications & the administrative burden of trusts

To avoid inheritance tax implications, you need a Trustee account so the insurer can pay out the death-in-service benefit before it’s allocated to the employee’s chosen beneficiary.

As an employer, you can set up and manage a company-owned trust. But setting up a trust via HMRC can be costly and you have to keep on top of trust administration and legislative changes (time you probably haven’t got).

The good news is that group life insurers will set up and administrate a Master Trust for you in the same way as a company-owned Trust but without the hassle. And the best bit? There’s no extra charge from the insurer.


8. Life assurance also covers employees on zero-hour contracts

There aren’t many perks that come with a zero-hours contract. But Life Assurance can be one of them. Group Life policies are usually all-inclusive so they cover all employees with a UK employment including:

  • Zero-hour contract employees
  • Permanent employees
  • Part-time employees
  • Directors

You can also set up categories within a group policy to give different types of employee a different benefit e.g. 4x salary for category 1 (Directors) and 3x salary for other employees.


9. Payouts reflect pay rises

If an employee has had a pay rise during the year of their death, insurers will take into account the employee’s current salary (even if it’s higher than the amount declared in the annual data submission).

As you can see, while Life Assurance might feel like a pretty basic employee benefit, these policies are packed full of unexpected value for you as the employer and your employees. And if you don’t already have an employee benefit scheme in place, it’s a brilliant place to start.


Need to get ‘employee benefits scheme’ off your to-do list?

Click here to tell us a bit about your business and we’ll arrange a kick-off call.


Need to get ‘employee benefit scheme’ off your to-do list?

Call us on 0118 916 5480

Need to get ‘employee benefit scheme’ off your to-do list?

Call us on 0118 916 5480

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