Analysis from FinTech pensionsync, owners of benefits.market (the online comparison site for group life, sickness, and health insurances) suggests that for many of the 965,515 small business owners in the UK who employ between 2 and 9 people that including themselves in a group life insurance policy could be up to 70% cheaper than insuring just their own life.
The universal reaction from small employers when they receive a price for buying employee life insurance for the entire company is: “I didn’t realise it was so cheap”.
Group policies often require no medical questionnaires and typically, for company’s of 10 employees of less, they insure the entire company workforce for an overall lower cost than an equivalent individual life insurance policy taken out by the business owner.
Here’s an example: a 47 year old business owner seeks a £180k benefit from life insurance (3 x her £60k salary). If she bought her life insurance from an internet insurance comparison site it would effectively cost her £879.20 per year. But if she bought the same level of cover (3x salary) for herself and all 7 of her employees then it would cost the business £262.09.
That’s a staggering difference of £617.11 per year.
At first glance, this is counter-intuitive: the price of insuring 8 people is significantly less than the price of insuring 1 person (who is also a member of the group of 8).
But, of course, it’s all about risk.
Group insurances spread the risk over the group, making the chances of an insurance pay out more predictable and therefore easier to cost for (from an insurance company perspective).
Additional advantages of group life insurance are that its not classed as a benefit-in-kind (meaning there is no personal tax implications for employees) but is a business expense (meaning the premiums can be deducted from the corporation tax bill).
HR consultants who service small businesses should consider discussing the pros and cons of group risk insurances with their clients, and review whether there are cheaper ways of continuing a high level of life cover for their client whilst saving them money and creating a valuable benefit to their staff.
The data behind the examples in this article are published by pensionsync on the www.benefits.market website. benefits.market is an online comparison site for group life, sickness, and health insurances.