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Group life assurance provides a benefit on an employee’s death in service. This can be a lump sum payable to nominated beneficiaries or a taxable pension payable to the employee’s dependants, or both.
Most group life assurance policies operate within HMRC’s regulatory framework for a ‘registered occupational pension scheme’. Lump sum death benefits can normally be paid tax free up to the Lifetime Allowance.
Generally, premiums paid by an employer can be offset against corporation tax and are not regarded as a benefit in kind.
The group risk market insures 9.88 million people for death benefits valued at 1.43 trillion pounds – Swiss Re Group Watch 2021.
The group risk industry paid out 11,592 death claims in 2020, valued at over £1.37 billion – GRiD 2021 Claims Survey.
The average claim was £118,244 and the main causes for claim were cancer (37%), heart disease (14%) and Covid-19 (8%) – GRiD 2021 Claims Survey.
A group life policy will often include some extra support services designed to help employers and employees alike on a daily basis – even if a claim is never made.
In total, there were 138,222 interactions during 2020 with the additional help and support services that are funded by group risk insurers, giving daily value to employers regardless of whether or not a claim was made under their policy – GRiD 2021 Claims Survey.
Expert advice should always be taken when setting up or reviewing a group risk insurance scheme to ensure that optimum cover is provided, any extra support services offered alongside the policy are used and all tax efficiencies are maximised.
Provides a continuing income during employee’s absence for illness, injury or disability
Represents 80% of all insured income protection cover in the UK
Used to cover employer’s promise of long term sick pay
Paid through payroll in normal way
Pays a tax free lump sum to employee on diagnosis of one of a defined list of serious medical conditions or on undergoing one of a defined list of surgical procedures
Can be extended to dependants
Increasingly popular under flexible benefits arrangements
Fastest growing group risk benefit
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