Life Insurance for Charities UK
In the heart of British society, charities and non-profit organisations are the unsung heroes. They tackle profound challenges, support the vulnerable, and champion causes that enrich our communities. Yet, the driving force behind this incredible work is their people: dedicated, passionate individuals who often prioritise mission over reward.
For trustees and directors of these vital organisations, a critical question arises: how do we best support the people who dedicate their lives to supporting others? While financial remuneration in the third sector can be modest compared to corporate counterparts, a robust employee benefits package can speak volumes.
This is where specialist life insurance for charities comes in. It's more than just a policy; it's a powerful statement of care, a strategic tool for attracting and retaining top talent, and a foundational pillar of financial resilience for your team and their families. This guide will explore the nuances of group life insurance tailored specifically for the UK's non-profit and charity sector.
Tailored Group Life Insurance for Non-Profits and Charities
Group life insurance, often known as a 'death in service' benefit, is a single policy taken out by an employer (the charity) that covers a defined group of people (its employees). Should an insured employee pass away while employed by the charity, the policy pays out a tax-free lump sum to their nominated beneficiaries.
For charities, this isn't just a standard off-the-shelf product. A tailored scheme recognises the unique structure, financial constraints, and ethos of the third sector. It's designed to be an affordable, high-impact benefit that aligns with the caring values of the organisation itself.
Unlike individual life insurance, which an employee would arrange and pay for themselves, a group scheme is arranged and typically paid for by the charity. This creates significant advantages in terms of cost, accessibility, and simplicity for the staff who benefit.
Why Should Charities Offer Group Life Insurance?
In a sector where every penny is scrutinised, investing in an employee benefit like life insurance might seem like a luxury. However, the return on this investment is measured in more than just pounds and pence. It’s an investment in your people, your mission, and your organisation's long-term stability.
1. Attracting and Retaining Top Talent
The UK charity sector employs around 950,000 people, according to the NCVO's UK Civil Society Almanac. Competition for skilled, experienced, and passionate staff is fierce. While non-profits may not be able to compete with private sector salaries, a comprehensive benefits package can be a powerful differentiator.
- Competitive Edge: Offering group life insurance demonstrates that you are a forward-thinking employer who values staff wellbeing beyond the immediate workplace.
- Message of Value: It sends a clear signal to potential and current employees that you care about them and their families' long-term security.
2. Boosting Staff Morale and Demonstrating a Duty of Care
Charity work can be emotionally demanding. Staff often work in high-pressure environments, dealing with sensitive and challenging situations. Knowing their employer has taken steps to provide for their family in a worst-case scenario can provide profound peace of mind.
- Reduced Financial Anxiety: Alleviates a major source of stress for employees, allowing them to focus more fully on their vital work.
- Strengthened Loyalty: An organisation that invests in its team's welfare fosters a culture of loyalty and mutual respect, which can reduce staff turnover. According to recent studies, employees with access to such benefits report higher job satisfaction.
3. Providing Tangible Financial Security
The payout from a group life policy can be transformative for a grieving family. It provides a financial cushion at the most difficult of times, helping to cover:
- Immediate funeral costs.
- Outstanding debts, such as a mortgage.
- Day-to-day living expenses.
- Future costs like university fees for children.
This single benefit prevents a personal tragedy from becoming a financial catastrophe for an employee's loved ones.
4. It's More Affordable Than You Think
One of the biggest misconceptions is that group life cover is expensive. Because the risk is spread across a group of employees, the cost per person is significantly lower than it would be for an individual policy. For a charity, it represents one of the most cost-effective ways to provide a high-value benefit. Premiums are also typically considered a tax-deductible business expense.
5. Simplicity and Accessibility for Employees
A key feature of group life insurance is the 'Free Cover Limit'. This means most employees can be covered up to a certain amount (e.g., £500,000) without any medical questionnaires or examinations. This is a huge advantage for individuals who might otherwise struggle to get affordable cover due to pre-existing health conditions.
How Does Group Life Insurance for Charities Work?
The mechanics of a group life scheme are refreshingly straightforward, designed to be easy for the charity to administer and for employees to understand.
The Master Policy The charity, as the employer, holds a single 'master policy' with an insurance provider. This policy document outlines all the terms, conditions, levels of cover, and the group of employees who are eligible.
Employee Enrolment Once the scheme is live, eligible employees are automatically enrolled. There are usually no lengthy forms for them to fill out and, as mentioned, no medical underwriting for the vast majority. The charity simply provides the insurer with a list of current staff members and their relevant details (like salary).
The Role of a Discretionary Trust This is a crucial element. The group life policy is almost always written into a discretionary trust. This simple legal arrangement ensures that:
- The payout is tax-free: The lump sum goes directly to the trust and is then paid to the beneficiaries. This means it does not form part of the deceased employee's estate and is therefore not subject to Inheritance Tax (IHT).
- The payout is fast: Because the money bypasses the lengthy probate process, beneficiaries can receive the funds much more quickly, often within a few weeks of the claim being approved.
- The employee has control: The employee completes a simple 'Expression of Wish' form, nominating who they would like to receive the money (e.g., a spouse, partner, children). While this isn't legally binding, the trustees of the trust will almost always follow these wishes.
Making a Claim In the unfortunate event of an employee's death, the process is managed by the charity's administrator (e.g., an HR manager or director). They will notify the insurer or broker (like us at WeCovr), provide the necessary documentation (like a death certificate), and the insurer will process the claim, paying the benefit into the trust for distribution to the beneficiaries.
Key Features and Considerations When Choosing a Policy
Not all group life policies are created equal. When setting up a scheme for your charity, it's vital to consider these key features to ensure it meets the specific needs of your organisation and your team.
Level of Cover
This is the most important decision. The payout is usually calculated as a multiple of the employee's annual salary. Common multiples are:
- 2 x salary
- 3 x salary
- 4 x salary
Some charities opt for a 'flat sum' for all employees (e.g., £100,000), regardless of their salary. This can be simpler to administer and communicate.
| Multiple of Salary | Employee Salary | Payout Amount | Description |
|---|---|---|---|
| 2x | £28,000 | £56,000 | Provides a basic financial safety net. |
| 4x | £28,000 | £112,000 | A more substantial sum, often enough to clear a mortgage. |
| Flat Sum | £28,000 | £100,000 | Provides a fixed benefit for everyone. |
| 4x | £45,000 | £180,000 | Senior staff roles may warrant higher cover. |
The right level depends on your budget and the demographic of your workforce. A younger workforce might have larger mortgages and young families, suggesting a higher multiple is more beneficial.
Eligibility Criteria
You need to define who is covered. Will the scheme include:
- All permanent employees?
- Full-time and part-time staff (often on a pro-rata basis)?
- Fixed-term contract workers?
- What about volunteers? (Covering volunteers is more complex and often requires a specialist personal accident policy rather than group life).
Clear eligibility rules are essential for fair and transparent administration.
The Free Cover Limit (FCL)
The FCL is the maximum amount of cover an individual can receive without needing to provide any medical information. This is a cornerstone of group schemes. If the multiple of salary for a high-earning director exceeds the FCL, they may need to be medically underwritten for the excess amount. A good broker will negotiate the highest possible FCL for your charity, ensuring the vast majority of your staff can join without medical fuss.
Added-Value Benefits
Modern group life policies are rarely just about the financial payout. Insurers now bundle a host of support services that can provide immediate, tangible value to your entire workforce, even if a claim is never made. These can include:
- Employee Assistance Programme (EAP): A 24/7 confidential helpline offering support for mental health, financial worries, legal issues, and more. This is an incredibly valuable resource in the often-stressful charity sector.
- Bereavement Counselling: Specialist counselling and support for the family of a deceased employee.
- Probate and Estate Administration Helpline: Practical legal guidance for the family on dealing with the complexities of an estate.
- Second Medical Opinion Services: Access to world-leading consultants to review a diagnosis and treatment plan.
These embedded benefits transform a life policy into a holistic wellbeing package, providing support for your staff here and now. At WeCovr, we also provide our clients with complimentary access to our AI-powered nutrition app, CalorieHero, helping staff take proactive steps towards better health and wellbeing.
The Cost of Group Life Insurance for Charities
For any non-profit, budget is a primary concern. The good news is that group life cover is one of the most affordable employee benefits available. The premium is calculated based on several factors.
Factors Influencing the Premium:
- Average Age of Workforce: Younger employees are lower risk, leading to lower premiums.
- Level of Cover: A 4x salary multiple will cost more than a 2x multiple.
- Number of Employees: Larger groups often benefit from better 'unit rates'.
- Nature of Work: A charity with office-based staff will have a lower premium than one with staff working in high-risk environments overseas.
Illustrative Costs
To provide a general idea, let's look at some hypothetical examples for a charity with 20 employees and an average age of 40, seeking a 3x salary benefit.
| Average Salary | Total Cover Assured | Estimated Annual Premium | Cost Per Employee Per Month |
|---|---|---|---|
| £28,000 | £1,680,000 | £2,100 | £8.75 |
| £32,000 | £1,920,000 | £2,400 | £10.00 |
| £35,000 | £2,100,000 | £2,625 | £10.94 |
These figures are for illustration only. Actual premiums will vary.
As you can see, for around the cost of a couple of coffees per month per employee, a charity can provide a benefit worth tens or even hundreds of thousands of pounds. Furthermore, the premiums paid by the charity are typically classed as an allowable business expense, making them deductible against Corporation Tax.
Beyond Group Life: Other Essential Protection for Charities
While group life insurance is a fantastic starting point, a truly comprehensive staff protection strategy considers what happens in the event of serious illness or long-term incapacity.
Group Critical Illness Cover
This can be added to a group life policy or stand alone. It pays out a tax-free lump sum to an employee if they are diagnosed with a specific serious condition, such as some forms of cancer, heart attack, or stroke. This money can help them adapt their home, cover private treatment costs, or simply provide financial breathing space while they focus on recovery.
Group Income Protection
Often considered the most important protection of all, Group Income Protection (GIP) pays a regular monthly income to an employee if they are unable to work due to illness or injury.
- The Problem: Statutory Sick Pay (SSP) is just £116.75 per week (2024/25 rate) and lasts for only 28 weeks. For most people, this is not enough to cover their essential outgoings.
- The Solution: A GIP policy typically pays 60-75% of the employee's salary until they are able to return to work, or until retirement age if necessary.
For a charity, GIP removes the difficult financial and emotional burden of deciding how long you can afford to support a sick employee on full pay. It provides a clear, fair, and sustainable policy for all.
Key Person Insurance
Does your charity rely heavily on one or two individuals? This could be the visionary CEO, the lead fundraiser who secures all your major grants, or a director with irreplaceable skills.
Key Person Insurance is a policy taken out by the charity on the life (and/or critical illness) of that key individual. If that person were to pass away or become critically ill, the policy pays a lump sum to the charity. This money can be used to:
- Cover the costs of recruiting a replacement.
- Bridge a gap in income while a new fundraiser gets up to speed.
- Reassure donors and stakeholders of the organisation's stability.
- Cover any temporary loss of profits or projects.
It's a vital tool for ensuring the operational continuity of the charity in the face of a personal tragedy.
Navigating the Market: How an Expert Broker Can Help
The group risk market is complex. Insurers have different appetites for risk, varying definitions, and a wide range of pricing structures. For a charity director or trustee, trying to navigate this alone can be daunting and time-consuming.
This is where an independent, specialist broker adds immense value.
Working with an expert like WeCovr means you get:
- Whole-of-Market Access: We compare policies and prices from all the leading UK group risk insurers to find the most suitable and cost-effective solution for your charity's unique needs.
- Expert Guidance: We translate the jargon, explain the options clearly, and help you make informed decisions on cover levels, eligibility, and trusts.
- Hassle-Free Implementation: We handle the paperwork, from setting up the policy to establishing the trust, saving you valuable administrative time.
- Ongoing Support: We are there to help with annual renewals, adding new staff, and, most importantly, to guide you through the claims process should the need arise.
Using a broker doesn't cost you more; in fact, our expertise and market leverage often secure you a better deal than if you went direct.
Wellness in the Third Sector: A Proactive Approach to Staff Wellbeing
Providing insurance is a crucial safety net, but a proactive approach to health and wellness can prevent some issues from arising in the first place. The charity sector is known for high rates of stress and burnout, with data from the Health and Safety Executive showing stress, depression or anxiety consistently account for the majority of work-related ill health cases.
Encouraging a culture of wellness is a powerful complement to your insurance benefits.
- Mental Health First Aid: Train managers to spot the signs of mental distress and provide initial support.
- Flexible Working: Where possible, offer flexibility to help staff manage their work-life balance.
- Promote Physical Health: Encourage lunch-time walks, provide healthy snacks, or run wellness challenges. This is where tools like the CalorieHero app, which we provide to our clients, can be a great, low-cost way to engage staff in their own health.
- Signpost Resources: Make full use of the Employee Assistance Programme included in your group life policy. Regularly remind staff that this confidential support is available to them.
A focus on wellness not only benefits your team but can also lead to lower sickness absence and, over time, a more favourable risk profile for your insurance premiums.
Case Study: A Mid-Sized UK Animal Welfare Charity
The Organisation: "Paws for Thought," a registered charity with 35 employees, including kennel staff, fundraisers, and administrative support. Average salary is £30,000.
The Challenge: The trustees were concerned about high staff turnover, particularly among experienced animal care staff who were leaving for better-paid jobs in private veterinary practices. Exit interviews revealed that while staff loved the work, financial insecurity and a lack of benefits were major factors in their decision to leave.
The Solution: The charity's leadership team worked with an expert broker to review their options. They decided to implement a comprehensive benefits package:
- Group Life Insurance: A scheme providing a 3x salary death in service benefit for all permanent employees. This was set up within a trust.
- Group Income Protection: A policy to pay 65% of an employee's salary after a 26-week deferral period, covering long-term sickness absence.
The Outcome: The total cost for the package was significantly less than the cost of recruiting and training just two new members of staff per year.
- Immediate Impact: The new benefits were communicated to all staff. The feedback was overwhelmingly positive, with employees expressing that they felt genuinely valued and more secure.
- Recruitment Boost: The charity was able to prominently feature its new, comprehensive benefits package in job adverts. They successfully recruited a new head of fundraising, who cited the security offered by the package as a key reason for choosing the charity over a corporate role.
- Long-Term Value: Within 18 months, staff turnover had reduced by 15%. The charity also had to use the income protection policy for a long-serving kennel manager who needed six months off for surgery. The policy worked perfectly, supporting the employee financially and allowing the charity to hire a temporary replacement without financial strain.
Conclusion: An Investment in Your Most Valuable Asset
For a charity, your people are not just your greatest asset; they are the embodiment of your mission. Investing in their security and wellbeing through a tailored group life insurance scheme is one of the most powerful ways to honour their contribution.
It is not an extraneous cost but a strategic investment. It fosters loyalty, aids recruitment, provides profound peace of mind, and underpins the very resilience of your organisation. In a world of uncertainty, offering the certainty of financial protection for your employees' families is a benefit that aligns perfectly with the caring, supportive ethos of the third sector.
By taking this step, you are not only safeguarding your team but also strengthening the foundation upon which your charity's vital work is built.
Is the payout from a charity group life insurance scheme taxable?
How many employees does a charity need to set up a group life scheme?
Can we cover volunteers on our group life insurance policy?
What happens if an employee already has their own personal life insurance?
What is a 'Free Cover Limit' and why is it important for charities?
What happens to the cover if an employee leaves the charity?
Why life insurance and how does it work?
What is Life Insurance?
Life insurance is an insurance policy that can provide financial support for your loved ones when you or your joint policy holder passes away. It can help clear any outstanding debts, such as a mortgage, and cover your family's living and other expenses such costs of education, so your family can continue to pay bills and living expenses. In addition to life insurance, insurance providers offer related products such as income protection and critical illness, which we will touch upon below.How does it work?
Life insurance pays out if you die. The payout can be in the form of a lump sum payment or can be paid as a replacement for a regular income. It's your decision how much cover you'd like to take based on your financial resources and how much you'd like to leave to your family to help them deal with any outstanding debts and living expenses. Your premium depends on a number of factors, including your occupation, health and other criteria.The payout amount can change over time or can be fixed. A level term or whole of life policy offers a fixed payout. A decreasing term policy offers a payout that decreases over the term of the cover.
With critical illness policies, a payout is made if you’re diagnosed with a terminal illness with a remaining life expectancy of less than 12 months. While income protection policies ensure you can continue to meet your financial commitments if you are forced to take an extended break from work. If you can’t work because you’ve had an accident, fallen sick, or lost your job through no fault of your own, income protection insurance pays you an agreed portion of your salary each month.
Income protection is particularly helpful for people in dangerous occupations who want to be sure their mortgage will always be covered. Income protection only covers events beyond your control: you’re much less likely to be covered if you’re fired from your job or if you injure yourself deliberately.
Questions to ask yourself regarding life insurance
Just ask yourself:👉 Who would pay your mortgage or rent if you were to pass away or fall seriously ill?
👉 Who would pay for your family’s food, clothing, study fees or lifestyle?
👉 Who would provide for the costs of your funeral or clear your debts?
👉 Who would pay for your costs if you're unable to work due to serious illness or disability?
Many families don’t realise that life, income protection and critical illness insurance is one of the most effective ways to protect their finances. A great insurance policy can cover costs, protect a family from inheriting debts and even pay off a mortgage.
Many would think that the costs for all the benefits provided by life insurance, income protection insurance or critical illness insurance are too high, but the great news is in the current market policies are actually very inexpensive.
Benefits offered by income protection, life and critical illness insurance
Life insurance, income protection and critical illness insurance are indispensable for every family because a child loses a parent every 22 minutes in the UK, while every single day tragically 60 people suffer major injuries on the UK roads. Some people become unable to work because of sickness or disability.Life insurance cover pays out a lump sum to your family, loved ones or whomever you choose to get the money. This can be used to secure the financial future of your loved ones meaning they would not have to struggle financially in the event of your death.
If it's a critical illness cover, the payout happens sooner - upon diagnosis of a serious illness, disability or medical condition, easing the financial hardship such an event inevitably brings.
Income protection insurance can be very important for anyone who relies on a pay check to cover their living costs, but it's especially important if you’re self-employed or own a small business, where your employment and income is a bit less stable. It pays a regular income if you can't work because of sickness or disability and continues until you return to paid work or you retire.
In a world where 1 in 4 of us would struggle financially after just four weeks without work, the stark reality hits hard – a mere 7% of UK adults possess the vital shield of income protection. The urgency of safeguarding our financial well-being has never been more palpable.
Let's face it – relying on savings isn't a solution for everyone. Almost 25% of people have no savings at all, and a whopping 50% have £1,000 or less tucked away. Even more concerning, 51% of Brits – that's a huge 27 million people – wouldn't last more than one month living off their savings. That's a 10% increase from 2022.
And don't even think about state benefits being a safety net. The maximum you can expect from statutory sick pay is a mere £109.40 per week for up to 28 weeks. Not exactly a financial lifeline, right?
Now, let's tackle a common objection: "But I have critical illness insurance. I don't need income protection too." Here's the deal – the two policies apply to very different situations. In a nutshell:
- Critical illness insurance pays a single lump sum if you're diagnosed with or undergo surgery for a specified potentially life-threatening illness. It's great for handling big one-off expenses or debts.
- Income protection, on the other hand, pays a percentage of your salary as a regular payment if you can't work due to illness or injury. It's the superhero that tackles those relentless monthly bills.
Types of life insurance policies
Common reasons for getting a life insurance policy are to:✅ Leave behind an amount of money to keep your family comfortable
✅ Protect the family home and pay off the mortgage in full or in part
✅ Pay for funeral costs
Starting from as little as a couple of pounds per week, you can do all that with a Life Policy.
Level Term Life Insurance
One of the simplest forms of life insurance, level term life insurance works by selecting a length of time for which you would want to be covered and then deciding how much you would like your loved ones to receive should the worst happen. Should your life insurance policy pay out to your family, it would be in a lump sum amount that can be used in whatever way the beneficiary may wish.
Decreasing Term Life Insurance
Decreasing term life insurance works in the same way as level term, except the lump sum payment amount upon death decreases with time. The common use for decreasing term life cover is to protect against mortgage repayment as the lump sum decreases along with the principal of the mortgage itself.
Increasing Term Life Insurance
Increasing term life insurance aims to pay out a cash sum growing each year if the worst happens while covered by the policy. With increasing term life cover amount insured increases annually by a fixed amount for the length of the policy. This can protect your policy's value against inflation, which could be advantageous if you’re looking to maintain your loved ones’ living standards, continue paying off your mortgage in line with its repayment schedule and cover your children’s education fees.
Whole of Life Insurance
Whereas term life insurance policies only pay out if you pass away during their term, whole of life insurance pays out to your beneficiaries whenever this should happen. The most common uses for whole life insurance are to cover the costs of a funeral or as a vehicle for your family's inheritance tax planning.
Family Income Benefit
Family income benefit is a somewhat lesser-known product in the family of life insurance products. Paying out a set amount every month of year to your beneficiaries, it is the most cost-effective way of maintaining your family's living standards to an age where you'd expect them to be able to support themselves financially. The most common use would be for a family with children who are not working yet so are unable to take care of themselves financially.
Relevant Life Insurance
Relevant Life Insurance is a tax-efficient policy for a director or single employee. A simple level term life insurance product, it is placed in a specific trust to ensure its tax efficiency. The premiums are tax deductible and any benefit payable should a claim arise is also paid out tax free, which makes it an attractive product for entrepreneurs and their businesses.
Important Fact!
We can look at a more suitable option mid-term!
Why is it important to get life insurance early?
👉 Many people are very thankful that they had their life, income protection, and critical illness insurance cover in place before running into some serious issues. Critical illness and income protection insurance is as important as life insurance for protecting your family's finances.👉 We insure our cars, houses, bicycles and even bags! Yet our life and health are the most precious things we have.
Easily one of the most important insurance purchases an individual or family can make in their lifetime, the decision to buy life, income protection, critical illness and private medical health insurance can be made much simpler with the help of FCA-authorised advisers. They are the specialists who do the searching and analysis helping people choose between various types of life insurance policies available in the market, including income protection, critical illness and other types of policies most suitable to the client's individual circumstances.
It certainly won't do any harm if you speak with one of our experienced FCA-authorised insurance partner experts who are passionate about advising people on financial matters related to life insurance and are keen to provide you with a free consultation.
You can discuss with them in detail what affordable life, income protection, critical illness or private medical health insurance plan for the necessary peace of mind they would recommend! WeCovr works with some of the best advisers in the market.
By tapping the button below, you can book a free call with them in less than 30 seconds right now:
Our Group Is Proud To Have Issued 800,000+ Policies!
We've established collaboration agreements with leading insurance groups to create tailored coverage
How It Works
1. Complete a brief form
2. Our experts analyse your information and find you best quotes
3. Enjoy your protection!
Any questions?
Learn more
Who Are WeCovr?
WeCovr is an insurance specialist for people valuing their peace of mind and a great service.👍 WeCovr will help you get your private medical insurance, life insurance, critical illness insurance and others in no time thanks to our wonderful super-friendly experts ready to assist you every step of the way.
Just a quick and simple form and an easy conversation with one of our experts and your valuable insurance policy is in place for that needed peace of mind!