Insure your business - people, life and health

Insurance as an employee benefit

Life and health insurance is a valuable benefit to provide for your employees. It can often be easy and relatively cheap to provide, and plays a major role in helping you attract and retain good quality employees.

It is possible to buy life insurance for employees individually, but more commonly businesses take out life insurance for a whole group of employees. This is called group life insurance and can be arranged alone, though it is also often found linked to a pension arrangement.

A group life insurance scheme might include all employees who have been working in the business longer than a certain period, such as six months.

Usually, the lump sum insured for each employee is a multiple of their wage or annual salary, subject to a maximum of four times annual salary. Employers might also set age conditions, eg insuring only employees over 18 and under 65.

It is also possible to buy critical illness cover for your employees, though this is less common, and is usually combined with a life insurance arrangement.

There is a range of other types of insurance for your employees and the need to provide these benefits may depend on the need to compete with other businesses for the best employees.

Other types of insurance offered as employee benefits include:

• private medical insurance - pays for the treatment of agreed acute conditions
• income protection - pays regular income to employees who are unable to work because of illness or injury

Bear in mind that your employees will pay tax on some benefits if they earn more than £8,500 per year. Your accountant or benefits adviser will be able to tell you which employee benefits are taxable. Tax relief is no longer available on any pension contributions paid by individuals which are used to fund life insurance policies.

Choosing and introducing employee benefits is a highly specialist area, and is well served by independent advisers. Find an independent financial adviser on the IFA Promotion website - Opens in a new window.

Subjects covered in this guide

• Introduction
• Identifying risks and insuring against them
• Basic types of life and health insurance
• Protecting the business - loss of a key person
• Protecting the business - loss of a partner or key shareholder
• Insurance protection for the owner-manager or the self-employed
• Insurance as an employee benefit
• Here's how I've protected my business against the loss of key staff

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