Essentially, it is a life insurance policy taken out by business owners for both their employees and their business. There are many different kinds of company life insurance, each one helping to financially support a business in different ways through the death of an employee.
In the unfortunate event of an employee death, it is important to have plans in place to help support those most affected, i.e. their immediate family and the business’s financial stability and future success.
Whilst company life insurance is not required by law, it can be provide important financial support to the business and to those nearest and dearest to the individual. In fact, less than 33% of people in the UK have any kind of life insurance – and it can be very important because it gives a lump sum to your partner and family for things like mortgage/rent, food, education and other necessities.
Where can I get company life insurance?
Company life insurance policies are available from a handful of insurers in the UK, with Aviva and AIG being the UK’s largest.
Specifically, for business life or group life insurance, yu life offers the most comprehensible policy at just £4.99 per month for each staff member, making it the simplest to buy for a team of 10, 20 or 100 people and the most affordable.
What is included in Company life insurance?
What is included in a company’s life insurance cover will depend entirely on the type of policy taken out. There are many different types of covers to choose from, however, company life insurance can be distinguished into two main categories, these being as follows:
- Insurance for the company– policies that help to financially support losses suffered to the business in the event of an employee death. Would losing a key director, manager or personality of the business have an impact on share price and productivity? Some companies such as Virgin Atlantic, Dyson, Microsoft and Facebook are hugely reliant on their founders.
- Insurance for the employee– policies that help to financially support losses suffered to the employee’s immediate family in the event of their death. This provides a lump sum to the next of kin and helps contribute towards ongoing bills and helps them maintain the same quality of life. This is paid for by the employer and is considered a nice employee benefit or perk.
Within both of these categories, there are numerous different policies that can be taken out to help provide financial support for both the business and the employee’s loved ones in the event of a death.
Insurance for the company
There are many different life insurance covers that can be taken out for the company, the two major ones being as follows: Business Loan Insurance and Keyman Insurance. These covers will help in financially supporting a business with the losses suffered as a result of an employee passing away.
Business Loan Insurance helps to support a company with any outstanding business loan repayments the deceased was involved with. The cover will help support a business in this way by paying a lump sum of cash to be used exclusively on helping to make repayments on this outstanding loan.
Keyman Insurance, as the name suggests, is used to financially support a business when it suffers the loss of an individual who was key to running the business. The financial aid the cover provides for this can be used on a variety of different factors within the business, all helping to reduce the financial losses suffered by the business as a result of this key figure passing.
Employee life insurance
One of the standard policies most businesses should absolutely consider is Group Life Assurance. Otherwise known as Death in Service, this type of insurance offers a lump sum of money to an employee’s immediate family (or otherwise stated loved ones) in the event of their death. This sum of financial aid is often the value of the employee’s salary multiplied by any number between 2 to 4. This type of policy will pay out regardless of whether the death happened during or at the place of work, or outside of this time/location frame.
Dependent upon the specified policy, Group Life Assurance can be paid out in the event of an accidental death, due to a long-term illness, or other specified incident. Some covers will also include Employee Assistance Program, in which bereavement counselling is typically offered. However, as previously mentioned this will all be entirely dependent upon the type of cover a business takes out.
For those with a business of under five employees, Group Life Assurance may not be a possibility. However, there are alternative covers that can be taken out for businesses of this size. Relevant Life Insurance provides exactly the same benefits for employees as Group Life Assurance, however this is set up and determined per employee.
Why is Company Life Insurance important?
- For companies – Company life insurance helps to strengthen the security and further stability of a business. It does this by providing financially support in the event that the company suffers the loss of an employee that was an integral part to the organisation’s success.
- For employees – By providing life insurance for employees, a business can help give its employees peace of mind in the event of their death, giving assurance that their families will have adequate support in the case of this happening. It can also help to boost employee morale by making the workers feel like the company cares for them and their families, and will help to support them financially if a loss is suffered.
Can you take a Group Life Insurance policy with you?
If you leave the company, most insurers will allow you to keep using the policy but you will simply pay the premiums thereafter (it will not be covered by the company).
There can be policy exemptions that make potential life insurance claims void such as having:
- pre-existing medical conditions (illness, stroke, heart and lung conditions)
- diabetes
- being over 70 years’ old
- work in high risk jobs (extreme sports)