Building the Foundation
In the Employee Benefits world, the foundations of an Employee Benefits Package should be about getting long term buy in from your employees by protecting them and their families in the event of accident, ill health or death.
One of the most recommended benefits during our assessment process is Death in Service, also known as Life Assurance. Death in Service should almost always be included in a well-rounded Employee Benefits package. It is typically great value, and the protection it provides employees and their families is amazing.
Why Death in Service is Important
A few years ago, one of our clients’ employees sadly passed away after he collapsed from a heart attack on the football field. He was only 23 years old. Being only 23, he didn’t have personal life insurance in place. The deceased was also a foreign national, which provided additional challenges at a difficult time.
At such a tragic time, Death in Service paid a multiplier of 4 x basic salary paid out as a tax-free lump sum to the employees’ family. The impact this had for the family was incredible. The Death in Service payment was able to cover the repatriation of the body, the funeral costs and as an additional element to the benefit, the provider was also able to offer bereavement counselling to the family.
At such a devastating time, the Death in Service benefit not only provided the necessary funds to take the financial burden off the family, it also offered bereavement support for his grieving loved once as well as his colleagues.
The Benefits of Death in Service Under a Group Banner
Death in Service is typically one of the lowest cost, simplest benefits to implement. Depending on the demographic of employees, normally the spread of risk will mean costs can be as little as £3 – £6 per month per employee. For a company of 100 people that could mean anywhere from £3,600 – £7,200 per year for this benefit.
With Death in Service under a group banner, there is a Free Cover Limit applied to most schemes. This meant that employees are automatically covered up to a certain amount without the need for any underwriting. The Free Cover Limit is typically quite substantial, and we regularly see it applied to £150,000 of basic salary. This means any employee under the basic salary of £150,000 are automatically covered without the need for underwriting.
Underwriting
One of the biggest benefits with Group Death in Service cover, is in the way the scheme is underwritten on mass, ensuring all employees receive a level of automatic cover. In comparison, when purchasing personal Life Insurance, an individual will have to declare their medical history. Depending on your medical history and any preexisting conditions, this could lead to higher monthly premiums and potentially having death from certain conditions ruled out for payment.
Going through the underwriting process can also be very time consuming. By the time GP reports and potential further examinations have been concluded, it is not uncommon for individual Life cover to take up to a year to be approved for a policy. Or potentially declined.
Taking all of this into account, this shows how being covered by a Death in Service scheme can be hugely reassuring to employees – especially if they have a better understanding of the challenges and cost of getting individual Life cover.
Employee Perception
Companies may ask, ‘How can you get employees to be excited about the less trendy benefits such as Death in Service?’ The answer is, you probably can’t. However, by focusing on the importance of a benefit, you can change someone’s perception and help them understand the value of it.
We’ve often heard companies say, “Our employees are too young to value this.” Truthfully, it is widely recognised that employees with families will value a Death in Service benefit more than younger employees without dependents. However, if you have a young demographic of staff, we believe having a strong foundation of benefits for all age groups is important.
With all of this in place, the perception of how a company looks after its employees can grow and it’s in these key moments employees value and respect their company the most. This helps build trust, loyalty and most importantly retention of key employees.
So yes, the trendy benefits are cool and should be part of an employee benefits package. Otherwise, life would be very dull. But when creating an Employee Benefits package remember; a strong house is only as strong as the foundations on which it sits.
Article by Dave Sykes
Director, Bigmore Benefits
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