Group death in service benefits are commercial policies covering a liability to pay benefit from an employer’s pension or group life insurance scheme if an insured person dies.
We usually pay benefit to the scheme trustees, who pass it on to the employee’s dependants’ in line with the scheme trust and rules. Alternatively, the trustees can request us to pay benefit direct, once they’ve identified who is to receive the benefit.
As policy holder, the employer or trustees are responsible for paying all premiums. With voluntary arrangements, an employer may choose to recover the cost of employee chosen cover through payroll.
Other variations of group life insurance policies allow employees to choose cover in respect of their spouse, partner or registered civil partner, or firms to protect their business if a self-employed equity partner or LLP member dies. Find further details below.
Group Life Insurance covers the trustees’ liability to pay a lump sum if an insured person dies.
Group Life Insurance can be set up in different ways:
- As a standard policy, with a fixed benefit level chosen by the employer for each group of eligible employees. An employer can choose to set this up:
- to cover the benefits of a registered scheme; or
- as one or more Excepted Group Life Policies
- As a flexible policy, where the employer funds a minimum benefit level, and allows employees a regular opportunity to top this up by choosing from a range of benefit levels. An employer can choose to set this up:
- to cover the benefits of a registered scheme; or
- as one or more Excepted Group Life Policies.
- As a voluntary policy, where employees have a regular opportunity to decide if they want cover themselves, and a range of benefit levels to choose from. An employer can only set this up to cover the benefits of a registered scheme.
- As a voluntary policy, where employees have a regular opportunity to decide if they want to cover their spouse, partner or registered civil partner with a range of benefit levels to choose from. An employer can choose to set this up:
- to cover the benefits of a registered scheme; or
- as a non-registered scheme.
- As a policy covering equity partners or Limited Liability Partnership members. A firm can choose to set this up to:
- Protect family and dependants by covering the benefits of a registered life insurance scheme; or
- Protect family and dependants by setting the cover up under one or more Excepted Group Life Policies; or
- Protect family and dependants by setting the cover up under a non-registered scheme; or
- Protect the business under a non-registered commercial arrangement. For example insuring a partner’s investment in the firm, which the firm may have to return if they were to die.
We offer access to Group Life Mastertrusts for employers wishing to provide group life assurance benefits to employees, but don’t want to set up or manage their own scheme. We have separate Mastertrusts for registered scheme benefits and Excepted Group Life Policy benefits.
Dependants’ Pension covers the trustees’ liability to pay a monthly income from a scheme to a dependant of an insured employee who dies. Employers can also choose to insure a monthly income that escalates each year to help protect it from the effect of inflation.
An employer chooses from a range of cover options. For example, the benefit levels, and if they wish to cover all employees or a defined group such as all managers.
We’ll confirm the employer’s choices in the policy.
We also provide access to a comprehensive Employee Assistance Programme and Legal & General’s Care Concierge service for all customers at no extra cost.
Target Market
The eligible market is any UK employer who wants to insure some or all of its Death in Service Scheme liabilities.
Lump sum Group Life Assurance benefits have been provided by employers to their employees since the 1920s. Membership in such schemes has grown and according to Swiss Re Group Watch 2021 there are now almost 9.9 million people covered within just over 58,400 policies.
Group Death in Service Benefits will not provide fair value to customers outside its target market.
Suitable for:
- Employers looking to protect the lives of at least 10 of its employees, equity partners or limited liability partners. Once cover starts, the policy will continue even if it subsequently covers fewer than 10 employees, but we retain the right to cancel policies with fewer than five employees.
- Employers looking to insure a lump sum of up to £10 million for each insured person (excluding voluntary policies). This is a combined maximum for Group Life Insurance and the equivalent lump sum value of a Dependants’ Pension.
- Employers looking for a voluntary policy with no minimum benefit, that allows employees to choose up to £250,000 cover.
- Employers looking to cover all employees, or a group defined by role, grade, service or pension membership.
- Employers looking to financially support the family and dependants of an employee who dies with a lump sum payment, a monthly income, or both.
- Partnerships looking to financially protect their business against the death of an equity partner or Limited Liability Partner member.
- Employers looking to provide cover to employees up to age 75 years.
- Employers looking to recruit and retain employees with an employee benefits package.
- UK employers looking to protect a largely UK based workforce.
- Employers who want to fund cover, as well as those who want to recover the cost of optional cover from employees.
- Employees with families and dependants who rely on the employee’s income, time or care.
- Our Mastertrust solutions are suitable for employers looking to provide group life assurance benefits for employees, but don’t want to set up or manage their own scheme.
Unsuitable for:
- Employers based outside the UK.
- Employers looking to financially protect their business against the death of key directors or employees (key person cover for people without self-employed tax status).
- Employers looking to individually select and include employees for cover.
- Employees who may not have families or dependants relying on them for their income, time, or care. However, if such employees were excluded from cover:
- Employers need to carefully consider discrimination risks. For example, it could create an age discrimination risk if the excluded group was mainly formed of younger employees.
- It could affect the inclusive nature of the cover which allows us to provide a policy specific level of cover without the need for medical underwriting. Increasing the need for medical underwriting carries the risk of excluding employees from the cover they need.
- It increases administration.
- Employees who have savings, investments or individual insurance which provide sufficient financial security for their family and dependants if the employee were to die.
- Employers without an administration system that helps them record employee benefit choices and provides us with monthly membership details for flexible and voluntary arrangements.
- Employees with Enhanced or Fixed Protection from the Lifetime Allowance whose employer is looking to distribute benefits under a new registered scheme or our registered Group Life Mastertrust. Such employees will lose this protection if they join another registered scheme. Instead, employers could consider setting up an Excepted Group Life Policy for these employees.
- Employees with registered pension scheme savings above or approaching the Lifetime Allowance who are joining a registered scheme. A tax charge could apply to registered scheme benefits once a person has used their Lifetime Allowance. Instead, employers could consider setting up an Excepted Group Life Policy for these employees.
- Employers looking for an insurer to provide a master trust for Dependant’s Pension cover.
- Employers looking to insure employees without using a trust or scheme.
- Employers looking to provide benefit under a scheme type that isn’t shown against the relevant policy set up choice shown above.