What Life Insurance Options Are Available for New Starters?
(Paid for by the Business where there is not a scheme in place already)
Relevant Life Insurance
This is the go-to solution for businesses without a group scheme.
What it is:
A tax-efficient, individual life insurance policy paid for by the employer, designed to benefit the employee’s family.
Why it works:
- Available even for one employee - no minimum headcount required
- Tax-deductible for the business and no benefit-in-kind for the employee
- Pays a tax-free lump sum to the employee’s chosen beneficiaries
- Doesn’t count toward pension lifetime allowance, which is ideal for high earners
- Flexible - can be tailored to the employee’s role, salary, or family needs
Best for: SMEs, sole directors, or businesses offering bespoke benefits to key hires.
Setting Up a Group Life Scheme (Death in Service)
If the business is planning to grow or wants to offer life cover to multiple employees, it can establish a group scheme - even with just two employees.
What it is:
A policy that pays a lump sum (typically 2-4x salary) if an employee dies while employed.
Why it’ useful:
- Simple to set up and relatively low cost
- Reassuring for employees - a familiar benefit
- Can be tiered based on role or tenure
- Doesn’t count toward pension lifetime allowance, which is ideal for high earners
- Usually placed in a trust, so payouts avoid inheritance tax
Best for: Businesses with at least two employees looking to build a formal benefits package.
Personal Life Insurance (Outside of Work)
While not paid for by the business, some employers offer salary sacrifice or financial advice support to help employees set up their own cover.
Why it’s relevant:
- Ensures continuity if employment changes
- Can supplement employer-provided cover
- Offers flexibility in terms of coverage amount and duration
Best for: Employees who want additional protection beyond what the company provides.
What to Tell New Starters
If a new employee asks, and there’s no scheme in place yet, you can say:
“We don’t currently offer a group life scheme, but we can provide Relevant Life Insurance, which gives you the same protection - a tax-free lump sum paid to your family - and is fully funded by the business. It’s tailored to your role and offers excellent tax advantages.”
Would you like help turning that into a benefits explainer, onboarding email, or even a short video script? I can help you hit both the emotional and technical notes your audience will respond to.
