Small and medium businesses (SMEs) are overestimating the cost of group life insurance, according to a survey conducted by group risk insurer Ellipse.
The company approached 504 UK SME employers to estimate the annual cost of providing £100,000 in life insurance benefit per employee.
The majority (57 per cent) estimated the cost would be in excess of £150. The other 4 per cent estimated it would cost less than £50.
This is in comparison to a recent Swiss Re Group Watch report that found that the average cost is £115 per employee per annum.
However, 39 per cent of employers said group life insurance would cost between £51 and £150, estimating correctly. The other 4 per cent estimated it would cost less than £50.
Lee Lovett, Ellipse chief executive, said: “We often find that advisers and employers are surprised about how little group life cover costs and this research confirms that.
“It is therefore clear that to encourage more small companies to put this important cover in place, we need to better communicate not only the benefits but cost too. For many SMEs employee benefits is an unknown quantity that sounds expensive, but it really isn’t.”
The survey also asked 1,005 employees for their opinions about workplace benefits. When asked which employee benefit would be of most value to them, 37 per cent said life insurance, making it the second most valued benefit after private medical insurance.
Lovett added: “It is clear from this research that employees value life insurance highly and all employers conscious of the need to attract and retain high quality talent, should be aware of this. They should also be aware that the cost of providing life insurance is much lower than they might expect.”
Graeme Mitchell, managing director of Lowland Financial, said that to fix the problem there could be some kind of introduction of a universal, simple online tool “that advisers could very quickly use to do a [group life insurance] assessment”.
He also pointed out the advantages to approaching group life cover. “If you can avoid going through the underwriting process, that’s a huge plus, as part of a group life policy, there’s some very simple questions, but that leads to peace of mind and the right cover,” he added.