We all hope to live to a ripe old age but the stats on those prematurely passing make for sombre reading – and present a strong case for death-in-service insurance.
Take last month. Provisional figures released by the Office for National Statistics show that people aged between 15-65 years accounted for over 13% of all recorded deaths in England and Wales.
That’s nearly 8,000 people of working age, excluding the increasing number of people who choose, or have, to work beyond 65. Most – some 6,500 – were in the 45-64 bracket, at an age when, armed with decades of experience, you might argue they are among the most productive and valued of employees.
At that age too they’re also more likely to be settled, to be bearing both the emotional and financial costs of being in a relationship, of having a family, children, a home…
Now relate this back to you workforce. How would you feel if one of your valued members of staff were to die and, on top of the pain of their passing, their loved ones had to worry about paying the bills?
If your business invested in death-in-service insurance (also known as group life insurance or group life assurance) then you could at least rest easy knowing that those left behind would receive financial support – when they might most need it.
The answer to “how much does group life insurance cost” is likely to be “not as much as you think!”
Research published by the industry organisation Group Risk Development (GRiD) reveals that most employers think death-in-service insurance costs more than it does. Typically group life insurance costs less than 0.5% of payroll, but GRiD reports that some 70% of employers believe the figure to be higher.
A significant minority – 8% – believe the cost to exceed 10% of payroll.
A survey of UK small and medium-sized businesses (SMEs) by group risk insurer Ellipse echoed those findings. The company polled over 500 SME employers and asked them how much they thought the annual cost of providing £100,000 of death-in-service insurance would be.
Now the actual cost of that group life cover, according to the reinsurer Swiss RE, is just £115 per employee per annum – equivalent to a mere £2.21 per employee, per week.
However Ellipse found that 57% of SMEs thought the bill would run to over £150 a year.
In short, if your company introduces a death-in-service insurance scheme, it usually pays a tax-free lump sum to beneficiaries named by a covered employee should they die when employed by you.
To be clear, their death need not happen at or be related to their work. Group life insurance pays out simply when an employee dies whilst on your payroll.
The amount that a policy pays out varies – and you can have a say in that when negotiating your own death-in-service scheme. Companies usually choose settlements which would be based on a multiple of an employee’s salary.
So, say an employee earns £35,000 and they are covered for twice they’re annual salary, their beneficiaries will receive £70,000 tax-free should they die whilst on cover.
Using a salary multiplier makes it easier to introduce a scheme, ensures it’s fair across pay scales and better protects beneficiaries. How much an employee earns is likely to be reflected in the lifestyles they and those around them enjoy – and their outgoings.
As we’ve seen group life insurance is a relatively low cost benefit – less than 0.5% of payroll costs.
But despite that low price tag it offers a high perceived value. The pay-out numbers can impress. Compare and contrast that eye-catching £100,000 settlement value to an employee that might cost you little more than two-quid a week.
Providing group life insurance also sends out the right message. It demonstrates you care beyond the wellbeing of your employees but to their dependents and loved ones.
Death-in-service insurance can also be used by an employee to offset the cost of any personal life insurance they purchase. Say they require £500,000 of cover. If you provide £200,000 of it through a group risk scheme, they can cut the amount of personal cover they need it – and with it, therefore, their premium.
There are a number of group risk insurance specialists that offer death-in-service cover for SMEs and other UK corporates.
These include AmTrust, Canada Life, Ellipse, Legal & General, Omnilife, Optimal Protection, Risk Assurance Management, Unum and Zurich. Chase Templeton’s business insurance experts work in partnership with all of these insurers to advise SMEs and employers of the best group risk solutions available for their organisations.
If you’d like a free, independent and no-obligation consultation to discuss death-in-service or other group insurance schemes, call our team on 01254 504910. Alternatively contact us through our website.
You can also read about the benefits of other group risk insurance schemes.