Category: Group risk fundamentals · Reviewed by Amy Price, Account Executive · Last reviewed 2026-06-10
Group life insurance is an employer-sponsored life assurance contract under which a lump sum benefit, typically expressed as a multiple of pensionable salary, becomes payable on the death in service of a covered employee. The benefit is paid through a trust (either a registered group life scheme established under Part 4 of the Finance Act 2004 or an excepted group life policy under section 480 of the Income Tax (Trading and Other Income) Act 2005) so that it can be paid promptly to the employee’s nominated beneficiaries free of inheritance tax.
Category: Group risk fundamentals Also known as: Group life assurance, death in service cover Typical multiple: 2x – 6x salary Related concepts: Death in service benefit, Registered group life policy, Excepted group life policy
A group life insurance scheme covers all employees who fall within a defined eligibility category — for example “all permanent UK employees under state pension age” — for a lump sum payable on death. The employer pays the premium; the cost is normally an allowable business expense; and the benefit is paid via a master trust or single-employer trust so that the proceeds do not form part of the deceased employee’s estate.
A group life policy may be written on one of two main bases. A registered group life scheme is registered with HMRC as a pension scheme under Chapter 2 of Part 4 of the Finance Act 2004 and is subject to lump sum death benefit allowance rules. An excepted group life policy is established under section 480 of ITTOIA 2005 and falls outside the registered pension regime, so it is not constrained by the lump sum allowance — but the trust must satisfy specific conditions to avoid relevant property charges under the Inheritance Tax Act 1984.
Cover is normally a multiple of salary (most commonly four times) and is available without medical underwriting up to the free cover limit. Above the free cover limit, individual medical evidence is required. Cover ceases on the earlier of leaving service, attaining the scheme cessation age (typically state pension age, but increasingly age 75) or the policy lapsing.
A 50-employee firm puts in place a four-times-salary excepted group life policy. The free cover limit at scheme inception is £600,000. Two employees with salaries above £150,000 have to provide a short health declaration for the layer above £600,000. The employer pays a single premium based on the total sum at risk. On the death in service of any employee, the trustees pay the lump sum within weeks to the employee’s nominated beneficiaries free of IHT.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-10. Next review: 2026-12-10.
Apex Insurance Brokers Limited. Authorised and regulated by the Financial Conduct Authority, FRN 724952. Registered in England and Wales, Companies House 07014570. This entry provides general information about UK insurance concepts and is not regulated advice. Consult your insurance broker on your specific position.
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