Death in Service
A group life assurance scheme enables employers to provide a tax free lump sum benefit and/or a dependent's pension to an employee’s family and children, if they should die in service.
Provision of a group life assurance scheme goes a long way towards demonstrating an employer’s genuine care for staff welfare as well as encouraging loyalty and reassuring staff that they are valued.
What is the difference between group life and individual life insurance?
Group life insurance is a term insurance plan that does not accumulate cash value. Because group life insurance is employer-sponsored term insurance, it provides more protection at a lower cost than individual life insurance.
A group life assurance scheme can offer, in the event of an employee’s death whilst they are on your payroll, a multiple of salary (i.e. 2 or 4 x salary) and/or a fixed amount as a lump sum benefit to the employee’s family and dependents.
A death in service pension can offer a regular income to an employee’s dependents with this being based upon a percentage of an employee’s salary or, in some circumstances, their prospective pension. It is also possible to include benefits for surviving children which can either be in addition to the spouse’s pension or payable should the spouse also die. Any spouse’s and children’s pensions can be payable on a level basis or increase in the course of payment by an agreed rate of escalation or by the Retail Prices Index.
Benefits for Employers
- Can usually be structured with premium rates that represent a very low percentage of the employer’s payroll.
- The registered schemes premiums are usually allowable as a business expense thereby reducing the net cost to the employer through corporation tax relief.
- A wide variety of features can be incorporated into any scheme therefore meaning that it can easily reflect an employer’s requirements.
- A group life assurance scheme can offer a Free Cover Limit therefore meaning that medical evidence is often not required at all.
- Having Group Life cover in place means employers can contribute invaluable financial support to beneficiaries. Group Life cover also plays a role in attracting and retaining staff, as it clearly demonstrates a business’s commitment and care to employees.
Benefits for Employees
- Any premiums paid on an employee’s behalf are not treated as a benefit in kind.
- Any lump sum benefit is normally payable outside an employee’s estate and free from Inheritance Tax liability.
- A group life assurance scheme can provide peace of mind and reassurance.
- Cover can be continued, up to a certain period, when an employee is absent from work due to sickness or taking, with an employer’s consent, a sabbatical.
- Employees who have had protection polices rated, with exclusions or cover not offered can receive up to free cover limit without medical underwriting.
- The above information regarding taxation is based upon our understanding of current legislation which, of course, is liable to change in the future and would depend upon an individual’s financial circumstances.
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