The group risk market insures 610,045 people for benefits totalling £44.1 billion*.
Group life
Group Life assurance provides a benefit on an employee’s death in service. This can be a lump sum payable to nominated beneficiaries or, more rarely, a taxable pension payable to the employee’s dependants, or even both.
Group Life insurance is one of the most simple and cost-effective, but most highly valued employee benefits that a company can offer its staff. It is often also referred to as Death in Service benefit, although it’s important to note that the death does not need to occur at work for an insurance claim to be valid.
If an employee were to die unexpectedly, group life cover can help ensure employee dependents receive financial assistance – relieving money worries at a very difficult and often the worst possible time.
It can assist in attracting and retaining talent within your business, while at the same time demonstrating your duty of care and promoting your company culture as a caring and altruistic employer.
The employer defines categories of scheme membership with clear eligibility definitions so there is no ambiguity in terms of who is covered.
Benefits are normally based on the employee’s earnings (up to a maximum multiple of annual salary) or as fixed lump sum amounts, and these can be tailored to meet an employer’s specific Demands & Needs, and those of their staff.
It is unlikely that employees will need to provide any kind of medical information to join the policy. However, it may be needed in certain specific circumstances, such as if an individual’s benefits package or salary is particularly high.
Trustee(s) are appointed by the employer and can be a group of people, or a company. They are responsible for administering the policy, establishing the beneficiary in the event of a claim, and making payment to the beneficiary, or beneficiaries, if a successful claim is made.
Insurers usually pay a lump sum benefit to the delegated Trustees of the scheme (in most cases the sponsoring Employer), usually by bank transfer. The Trustees can then choose whatever method they think is best to pass the money to the intended beneficiary. This is most commonly done by bank transfer or cheque.
As the benefit is provided by the employer for their employees, the employees will no longer be covered if they leave the company and/or reach the agreed termination age of the scheme.
Group schemes can start from as little as three lives.
Generally, premiums paid by an employer can be offset against corporation tax and are not regarded as a P11d benefit in kind for employees.
Group income protection
Group Income Protection is designed to protect both employer and employee from the financial consequences of long-term absence.
Whether used as part of a comprehensive employee benefits package, or on its own, this valuable benefit is designed to provide a financial support of a proportion of income replacement for employees if they are unfortunate enough to be unable to work for an extended period, due to illness and/or injury.
There is always a limited maximum percentage of salary or earnings (never 100%) that can be covered, to ensure that employees are incentivised to return to full time work.
It is important to note that this is not an early retirement pension or unemployment benefit. Payment of the benefit is dependent upon regular medical reviews to establish an employee’s ongoing inability to work.
The benefit is paid to the employer and passed to the employee through the PAYE payroll system. Generally, premiums paid by an employer can be offset against corporation tax and are not regarded as a P11d benefit in kind for the employees, rather they are taxed as earned income.
Importantly this is not just an insurance designed to kick in after a defined period of absence. Moreover, it can provide invaluable employee rehabilitation and support services as both prevention and cure (i.e. Employee Assistance ‘EAP’ programmes) to help ensure employees get all the help they need to return to work as soon as possible and, ideally, access to support services at the earliest possible opportunity to prevent absences occurring in the first place.
Group Income Protection is used by employers:
- to help manage sickness and the associated costs. Insurer rehabilitation support can help employees get back to health and back to work – reducing the length of sickness absence and the impact on a business.
- as an employee benefit to provide continued income for sick and incapacitated employees, helping to relieve money worries at a difficult time. This can boost morale and help attract and retain the right calibre of staff – factors that are essential to business growth.
Benefits are normally based on an employee’s earnings, with options available to meet the employer’s specific needs and budget.
A range of options enables employers to mix and match benefits, tailored to their exact needs to contain or limit costs. These options can include:
- a choice of basic benefit, based on a percentage of earnings (typically 75%, 2/3rds, 50%).
- a choice of incapacity periods before claims commence – usually 13, 26 or 52 weeks.
- a choice of benefit payment terms – paid until a chosen termination age, or limited to 2, 3, 4 or 5 years’ worth of maximum payments.
- additional cover for the costs of employer’s liability for National Insurance contributions.
- additional cover for the costs of employer’s pension contributions.
- benefit indexation, ensuring benefits rise each year in line with inflation.
- final lump sum, payable at the end of a limited payment period (e.g., to fund early retirement).
- the option to ask for pay direct terms (should the employer/employee ultimately wish to sever ties).
The employer defines categories of scheme membership with clear eligibility definitions so there is no ambiguity in terms of who is covered.
It is unlikely that employees will need to provide any kind of medical information to join the scheme. It may be needed if an employee’s earnings or benefit is particularly high or in some other specific circumstances.
Once a claim is accepted, the insurer pays the benefit to the employer every month, which in turn pays the benefit to the employee via their normal (PAYE) payroll system, after the deduction of relevant Income Tax and Employee’s National Insurance Contributions.
As the benefit is provided by the employer for their employees, then employees will no longer be covered if they leave the company or reach the agreed termination age of the scheme.
Group schemes can start from as little as three lives.
We describe this benefit as ‘win win win’ for all parties because:
- the employee gets the support they need to return to work, and a full-time wage, as quickly as possible.
- the employer ensures the return of a happy, healthy employee, and a return to productivity as a result, as soon as possible – plus the kudos of being a caring employer.
- the insurer minimises their claims costs, helping to keep premium rates as low as possible.
