How Much Does Group Life Insurance Cost for a Small Business?
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Group life insurance cost for a small UK business can't be given as a single figure, because every scheme is priced on the people it covers.
Your own price will depend on your team's ages, health, salaries, the benefit multiple and the type of work they do, so the only reliable figure is a quote for your own scheme.
This guide explains how insurers price a scheme and what pushes the premium up or down.
Key facts
- Group life insurance premiums are usually priced as a rate per £1,000 of cover or as a percentage of the total salary bill.
- A group life scheme commonly pays a lump sum of two to four times salary if an employee dies while employed.
- The age profile of the workforce is one of the biggest drivers of group life insurance cost.
- Group life rates are usually fixed for a set period, commonly one to three years, and then reviewed.
Is there a typical cost for group life insurance?
There isn't a reliable typical cost for group life insurance, because the premium depends on who is in the scheme. Two companies with the same number of employees can pay very different amounts once ages, health, salaries, occupations and the benefit multiple are taken into account. The only accurate way to find your cost is to get quotes for your own team.
How are group life premiums calculated?
Group life premiums are usually calculated in one of two ways: a unit rate per £1,000 of cover, or a percentage of the total salary roll. Either way, the insurer prices the total benefit it could pay across the whole group.
Unit rate per £1,000 of cover
With a unit rate, the insurer quotes a price for every £1,000 of benefit. If your total cover is £1,400,000 and, purely as an example, the rate is £1.00 per £1,000, the annual premium would be £1,400.
Percentage of the salary roll
With a percentage of payroll, the premium is quoted as a share of total salaries. As an example, a 0.4% rate on a £350,000 salary bill gives £1,400 a year. The cost then moves in line with pay rises and new starters.
What affects the group life insurance price?
The main factors that affect the cost of group life insurance are your employees' ages and salaries, the benefit multiple and the kind of work they do. Scheme size, scheme type and the free cover limit also move the group life insurance price.
- Age profile: an older workforce costs more to cover.
- Salary roll: a higher total salary bill means a bigger total benefit and a higher premium.
- Benefit multiple: cover at four times salary costs roughly twice as much as cover at two times salary.
- Occupation and industry: manual or higher risk work, such as construction, is usually priced higher than office work.
- Scheme size: larger groups spread the risk further, while very small schemes may have minimum premiums.
- Registered or excepted scheme: the structure affects tax and admin, and can change the insurer and rate on offer.
- Free cover limit: the level of cover each person gets without medical evidence. Higher earners above it may need underwriting.
If a director's benefit is above the free cover limit, the insurer may ask for medical evidence before covering the excess. Very small schemes can also struggle to meet insurer minimums, which we explain in group life insurance minimum employees.
Are group life premiums tax deductible?
Group life premiums are generally treated as an allowable business expense for the employer, so the company may be able to claim corporation tax relief on them. At the 2026/27 main rate of 25% corporation tax, relief could reduce the net cost of a £1,400 premium to £1,050. This depends on your circumstances and current legislation.
For employees, cover under a registered or excepted scheme is not normally a taxable benefit in kind. We cover the payroll and pensions side in detail in death in service benefit: tax and HMRC rules.
For a wider look at how each type of company-paid cover is treated, read is life insurance a business expense?
How can you keep the cost down?
You can keep group life insurance costs down by choosing a lower benefit multiple, adding an eligibility waiting period, locking in rates for longer and reviewing the scheme at every renewal.
- Lower multiple: two or three times salary costs less than four times, and can still be a valued benefit.
- Waiting period: cover that starts after, say, three or six months reduces the cost of short-stay staff.
- Longer rate period: fixing rates for two or three years can protect your budget from mid-term rises.
- Renewal review: asking an adviser to market the scheme at renewal could find a better rate.
If you'd like to see these choices alongside the other ways a company can provide cover, our overview of ways a company can pay for life cover sets them side by side.
Want a real price for your team? Ask Executive Life to compare group life quotes from across the market.
Group life vs relevant life: which costs less for the smallest companies?
For a company with only one or two directors, individual relevant life policies are one of the business life insurance policy options that can replace group life, and the cheaper route depends on the people covered. Group life pools the risk across your team, while relevant life is priced for each person on their age, health and smoking status.
| Cost factor | Group life insurance | Relevant life insurance |
|---|---|---|
| How it is priced | Pooled rate for the whole group | Individual premium for each person |
| Medical underwriting | Usually none up to the free cover limit | Full individual underwriting |
| How long rates are fixed | Commonly one to three years, then reviewed | Premiums can be fixed for the policy term |
| Minimum premium or size | Insurer minimums may apply | No scheme minimum |
| If the person leaves | Cover usually ends | Policy can usually move with them |
| General comparison only. Terms vary by insurer and policy. | ||
A healthy younger director may find relevant life premiums competitive, and the price can be fixed for the term rather than reviewed every few years.
Cost isn't the only difference between the two routes. Our comparison of death in service vs relevant life insurance goes through the wider trade-offs.
Frequently asked questions
How much does death in service cost per employee?
There's no standard cost per employee for death in service. Each scheme is priced on the ages, health, salaries and occupations of the people covered and the benefit level you choose, so the cost per person can vary widely between businesses. A broker can compare quotes for your team.
Is group life insurance cheaper than individual life insurance?
Group life insurance is often cheaper per person than individual life insurance, because the insurer pools the risk across the whole team and usually skips medical underwriting up to the free cover limit. The trade off is that group life cover normally ends when an employee leaves the business.
Does group life insurance cost more for older employees?
Yes. The age profile of your workforce is one of the main drivers of group life insurance cost, because the risk of death rises with age. A scheme with mostly older employees will usually pay a higher rate than one with a younger team on the same salaries.
Are group life premiums an allowable business expense?
Group life premiums are generally treated as an allowable business expense, so the employer may be able to claim corporation tax relief. The exact position depends on your circumstances, the scheme type and current legislation, which can change. Speak to your accountant or a qualified adviser to confirm it.
Can group life premiums change each year?
Yes. Group life rates are usually fixed for a set period, commonly one to three years, and then reviewed. The total premium can also change at each renewal as employees join or leave and salaries rise, even when the rate itself stays the same.
Is there a minimum premium for group life insurance?
Some insurers set a minimum annual premium or a minimum number of employees for a group life scheme, which can make very small schemes relatively expensive. Minimums vary by insurer, so it's worth comparing the market. Individual relevant life policies have no scheme minimum.
Written by
Alex Ogden DipFA | Director | Executive Life
Alex Ogden DipFA holds the Level 4 Diploma for Financial Advisers (DipFA) awarded by the Walbrook Institute London, formerly known as the London Institute of Banking & Finance (LIBF). He is authorised by the FCA Ref: AJO01072.
Tax rates and thresholds are subject to change. This article will be updated following each HMRC Autumn Budget or Spring Statement where relevant thresholds change.
Executive Life is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 985058. Registered office: Unit 6, Birchy Cross Business Centre, Broad Lane, Solihull, West Midlands B94 5DN.
This article is for general information only and does not constitute financial advice. Tax treatment depends on individual circumstances and current legislation, which may change. Always speak to a qualified adviser before making financial decisions.