Group life insurance is a type of insurance taken out by a business to cover its employees. It’s sometimes provided as part of a wider employee benefits package, alongside other perks like additional holiday allowance, pension contributions, discounted memberships, and private healthcare. It’s often referred to as ‘death in service’ cover.

In this guide, we'll explain how it works, the benefits of having it, whether you should also take out your own cover, and what to do if you switch jobs.

How group life insurance works

If you’re covered by group life insurance through your employer, it works just like any other life insurance policy: a tax-free lump sum is paid to your loved ones if you die while you’re employed by the company.

The amount paid out is usually between 2x and 4x your annual salary, but this is down to the individual employer and agreed when the policy is put in place. If you stay working at the company, you’ll typically be covered by the policy all the way up until your retirement (or until the policy term ends).

Check with your employer if you're not sure whether you're covered by death in service and, if so, to what level.

How much does group life insurance cost?

As an employee whose employer provides death in service, you don’t pay anything to be insured. You’re covered simply because you're an employee of the company. Your employer will pay the insurance policy premiums.

Can I cash out my group life insurance policy?

No, you can’t cash out a group life insurance policy. A payout is only made to your loved ones if you die while you work for the company.

This is the same with a personal life insurance policy; it simply covers you in case you die, so you can’t claim any money back if this doesn’t happen.

Can I convert group life insurance to personal life insurance?

This is sometimes an option, depending on the policy your employer took out and the insurer,  but whether or not its the best option for you depends on your circumstances.

If you convert your group policy to a personal policy, the monthly premiums you'd be left to pay are often higher than they would be for an equivalent policy you could take out yourself. If you can take out a personal policy instead, you might choose to do that for this reason.

However, if you’d struggle to take out personal life insurance or it would be expensive – e.g. because you have a health condition – you might choose the conversion option instead. That way you keep some life cover in place on the terms originally agreed.

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Am I still covered if I change jobs?

Most group life insurance policies are not portable. This means you’ll no longer be covered if you stop working for the employer who provides the death in service benefit. Your new employer may provide a similar benefit; or you may want to consider getting personal cover in place if you switch jobs.

I’ve got group life insurance – do I need my own cover?

Having group life insurance or death in service doesn’t mean you don’t need your own life insurance. It’s a good benefit to have, but it might not be totally adequate in your circumstances. To work out if you also need personal life insurance protection, consider these three things:

  • Death in service might not be enough cover for your needs
    If you died, your death in service payout might not be enough to cover everything your loved ones would need without you and your income. Getting your own life insurance policy in place means you can bridge the gap, making sure your family would never be left struggling financially.
  • You might move jobs and lose your cover
    You’re usually only covered with death in service as long as you work for the employer that provides it, so if you switch employer, you’ll no longer protected in case you die (unless your new employer also provides this benefit). With a personal policy, you can choose exactly how long you’ll be insured for – making sure you’ll always be covered for as long as you have financial liabilities.
  • Life insurance premiums are cheaper the sooner you buy cover
    The price of life insurance goes up with age and other factors, so if you want to get a personal policy in place – to make sure you’re covered for the right amount and right length of time – it’s best to get it in place sooner rather than later. You can always take out extra cover down the line, if your needs change, but getting some cover in place at a lower rate should work out better value in the long run.

This post is intended for informative purposes only and does not constitute advice.