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What is group life insurance?

LifeSearch author Katie Crook-Davies
4 min read

by Katie Crook-Davies, Protection Writer

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Katie works with insurers and distributors to make protection propositions more accessible, pricing more transparent and marketing messages more simple.See author bio

Guide last reviewed 10 Oct 2023

It’s been said before, and we’ll say it again - a business is only as good as its employees. That’s why it’s never been more important to find the best people and also keep them around. Competition for talent is fierce, but things like good company benefits can go a long way in moving your business to the front of the pack. Think generous pension contributions, additional holiday days and discounted gym memberships. But there’s another valuable employee benefit that you may not have thought of, and that’s group protection insurance. 

In this guide we’ll explain why you might want to consider group insurance as a new company perk and how the different types of group insurance work.

How does group insurance work?

Group insurance, or business protection as we like to call it here at LifeSearch, is a type of insurance that’s purchased by a business for its employees. It’s a company perk that’s not just a nice-to-have but a really valuable addition to any employee benefits package. These products step in to protect your employees and their families financially against things like poor health and even death. They’re also cost effective for you as a business - more on this later.

What are the different types of group insurance?

When we say group protection we’re actually referring to three types of product - group life insurance, group critical illness insurance and group income protection insurance. They all work slightly differently, let us explain how:

Group life insurance

This product usually pays out a tax-free lump sum of money to your employee’s family if the employee passes away while working for you. This product is otherwise known as death in service insurance and we’ve created a handy guide which explains the differences between this product and standard life insurance. Usually the lump sum payment is set at between two and four times an employee's annual salary.

Wouldn’t it be nice to know that an employee’s family would be taken care of financially should the worst happen and they pass away? Beyond this protection simply being a good thing to put in place, it's highly valued by employees.

Group critical illness insurance

This product works in a similar way to group life insurance, but it pays out a tax-free lump sum if your employee is diagnosed with a specified serious illness. This payout can help to relieve any financial stress suffered by your employee and their family at an already stressful time. Often people use money from critical illness insurance to pay off a mortgage or other debts, or simply to replace lost income. Some insurers also offer solutions to cover not only your employees, but their families too, against serious illness.

There are lots of different options when it comes to group critical illness insurance, but that’s where we can help! At LifeSearch, we work with lots of businesses to build bespoke employee benefits packages, and we’d be happy to build one for you! Just give us a call on 0800 316 7253, we’re available Monday - Friday 8am – 8pm, Saturdays from 9am – 2pm and Sundays 10am - 3:30pm.

Group income protection insurance

Illness can sadly affect all of us, having not only an emotional impact but often a financial one too. If one of your employees were to fall ill or have an accident which meant that they couldn’t work, how long would you be able to pay their salary for? Continuing to pay a salary to an absent employee over the long term can quickly become unaffordable for many businesses, but that’s where group income protection insurance can help.

This product pays a regular income to your employees as long as they’re unable to work. It basically replaces their income, enabling them to continue paying their bills and removing any financial worries. What’s more, many insurers also offer additional free care and rehabilitation services, designed to help your employees recover faster and return to work sooner - good for your employee and good for you as a business.

To find out more about the protection benefits available to your employees, why not request a callback from one of our experienced LifeSearch advisers?

What are the benefits of group insurance?

We’ve covered most of the pros of group insurance above, but there are a few more things that we think businesses should know about.

Firstly, group protection insurance is a great employee benefit for attraction and retention of the best people. People like these products, and in the aftermath of a global pandemic, over 20% of employees consider life insurance a more important perk than they did before[1]. 

Secondly, group insurance is tax-effective, because the premiums you pay as a business can usually be treated as a business expense for corporation tax purposes. In addition, group life insurance payouts are usually free from inheritance tax (IHT), which benefits employees too! Check out our guide on IHT for more information.

Thirdly, group protection insurance is a very affordable employee benefit. In fact, group life insurance can cost as little as 1% of your business’s salary costs. Often, group insurance is also cheaper than if your employees bought individual policies for themselves, so you can see why employees value these protection benefits so highly!



Explore the protection options for your small-medium sized business

If you’re a business owner and would like to offer group life insurance to your employees as a company perk, or just want specific business protection, we can help.

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LifeSearch author Katie Crook-Davies
Katie Crook-Davies Protection Writer
Katie is an independent insurance consultant who is passionate about protection and wants to share that passion with others through engaging marketing content. She hopes that one day people will get as excited about protecting themselves and their loved ones, as she does!
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