What is a free cover limit and why does it matter for employees?

A free cover limit is the amount of cover the insurer provides automatically, without individual medical questions, because it prices the whole scheme population rather than each person separately. Any member whose benefit works out above that limit is underwritten individually instead. Because these limits vary by insurer and move with market conditions, no market-wide figure is quoted here, but it is why most employees get cover without any health questions while a few higher earners may need to answer some.

Why does a group life scheme need to be written under trust?

Writing the scheme under trust means the benefit is paid at the trustees’ discretion rather than becoming part of the deceased employee’s estate. This allows the money to reach the family more quickly, since it avoids waiting for probate, and keeps the payment outside the estate for the purposes the trust is designed for. It is one of three administrative details, alongside membership data and nomination forms, that decide whether the money actually reaches the right people when it is needed.

Why do nomination forms need updating rather than completed just once?

An expression-of-wish or nomination form tells the trustees who the member would like to benefit, but trustees ultimately use discretion, and an outdated form can cause confusion or distress if circumstances have changed. Updating the form after a separation, a marriage or a new child is a practical step employers and employees should not skip. Alongside keeping joiner, leaver and salary data current with the insurer, this is one of the administrative details that decides whether a claim runs smoothly.

Business and group protection

Group life insurance and death in service explained

The short answer

Group life insurance pays a lump sum to an employee’s family if they die while employed — the benefit usually described as death in service. The employer owns the scheme and pays the premiums, cover is normally a multiple of salary, and the benefit is paid through a trust on the trustees’ discretion.

Written by Ilana Eldad. Reviewed by Andrew Buscu.

Published 15 September 2026. Last reviewed 15 September 2026. Next review due 15 December 2026.

What to know about group life insurance and death in service

Cover is usually set as a multiple of salary for a defined category of employees. Read more
A free cover limit lets most members avoid individual medical questions. Read more
The scheme must be written under trust so trustees, not the estate, pay the benefit. Read more
Nomination forms and membership data need updating whenever circumstances change. Read more

Thinking about group life insurance and death in service

What works well

Cover for a whole workforce without individual medicals below the limit.
The trust lets trustees pay the family quickly.
A visible, valued benefit at a modest cost per employee.

What to watch

Cover ends when employment ends, with nothing to take away.
Benefits above the free cover limit need individual underwriting.
Out-of-date nomination forms cause avoidable distress.

Salary multiples, free cover and nomination forms

A group life scheme covers a defined category of employees — often everyone, sometimes a named grade — for a benefit set as a multiple of salary. The insurer prices the whole population rather than each individual, and applies a free cover limit: cover below the limit is granted without individual medical questions, while any member whose benefit exceeds it is underwritten separately. Because those limits and typical multiples differ by insurer and move with the market, we do not publish figures here. Three administrative details decide whether the money reaches the right people. The scheme must be written under trust so the benefit is paid at the trustees’ discretion rather than into the estate. Employees must complete a nomination or expression-of-wish form, and update it after a separation, a marriage or a new child. And the employer must tell the insurer about joiners, leavers and salary changes on time, because a member the insurer does not know about is a claim waiting to be argued. On tax, section 307 of ITEPA 2003 keeps employer provision for a death benefit outside the residual benefit-in-kind charge.

Run an annual check of the membership data, the salary roll and the nomination forms, and make sure new starters are told the benefit exists and how to nominate. Whatever the specifics of group life insurance and death in service, the discipline that protects the business is always the same: record who owns the policy, who receives the money and which agreement directs it; get the insurer’s and the accountant’s position in writing; and review the arrangement whenever the people, the shareholdings or the borrowing change.

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Common questions

What is a free cover limit and why does it matter for employees?: A free cover limit is the amount of cover the insurer provides automatically, without individual medical questions, because it prices the whole scheme population rather than each person separately. Any member whose benefit works out above that limit is underwritten individually instead. Because these limits vary by insurer and move with market conditions, no market-wide figure is quoted here, but it is why most employees get cover without any health questions while a few higher earners may need to answer some.
Why does a group life scheme need to be written under trust?: Writing the scheme under trust means the benefit is paid at the trustees’ discretion rather than becoming part of the deceased employee’s estate. This allows the money to reach the family more quickly, since it avoids waiting for probate, and keeps the payment outside the estate for the purposes the trust is designed for. It is one of three administrative details, alongside membership data and nomination forms, that decide whether the money actually reaches the right people when it is needed.
Why do nomination forms need updating rather than completed just once?: An expression-of-wish or nomination form tells the trustees who the member would like to benefit, but trustees ultimately use discretion, and an outdated form can cause confusion or distress if circumstances have changed. Updating the form after a separation, a marriage or a new child is a practical step employers and employees should not skip. Alongside keeping joiner, leaver and salary data current with the insurer, this is one of the administrative details that decides whether a claim runs smoothly.