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Employee benefits insurance, benefit by benefit

Employee benefits insurance is the cover an employer provides for staff on top of their salary: death in service, group income protection, private medical insurance and relevant life cover.

Each one pays someone different, and HMRC taxes each one differently.

This guide sets them side by side.

Every claim here is our summary of a named external source, linked beside it. Sources change: check the wording at the link before you rely on it.

How each is taxed ↓See the covers →
Group risk claims paid in the UK in 2025£2.69bnGroup life, income protection and critical illness, reported by GRiD. Check it at the source.

Source: GRiD (GRiD ↗)

01 · The covers

What counts as employee benefits insurance

Aviva describes group protection as a policy employers can offer employees as a benefit on top of their salary, which can include group life, group income protection and group critical illness cover (Aviva ↗).

Each card links to our guide; the orange line says who the policy pays.

Who each pays, summarised from the sources: death in service (Legal & General ↗), group life (Canada Life ↗), group income protection (HMRC ↗), medical insurance (HMRC ↗), relevant life (Royal London ↗), executive income protection (Legal & General ↗). Group critical illness: Canada Life pays the employee a tax-free sum on a defined illness (Canada Life ↗).

02 · Tax

Tax treatment of each employee benefit

The question for staff is whether the premium counts as a taxable benefit in kind.

For employer-paid life cover, HMRC's 2018 reform lets the beneficiary be any individual or registered charity without the premiums being treated as a taxable benefit (HMRC ↗).

For medical insurance, the employee is chargeable on the premium the employer pays (HMRC ↗), and the employer reports it on a P11D and pays Class 1A National Insurance (GOV.UK ↗).

For the employer, Aviva says group protection premiums may be tax-deductible as a business expense (Aviva ↗), and Royal London says relevant life premiums generally are, if paid wholly and exclusively for the business (Royal London ↗).

Tax depends on your facts: check with your accountant.

Death in service

Group income protection

Medical insurance

Relevant life

Pays
A lump sum for the family (Legal & General ↗)
An income while off sick (HMRC ↗)
For treatment (HMRC ↗)
The family, through a trust (Royal London ↗)
Premium a benefit in kind?
No, for an individual or charity beneficiary (HMRC ↗)
No: the right to sick pay is not chargeable (HMRC ↗)
Yes: P11D and Class 1A (GOV.UK ↗)
Not a P11D benefit, says Royal London (Royal London ↗)
Payout
A tax-free cash sum, says Legal & General (Legal & General ↗)
Taxable as earnings (HMRC ↗)
Treatment, not cash
Outside the EFRBS charge (HMRC ↗)
Swipe to compare

Rows summarise HMRC, GOV.UK and the insurers; check each at its link. Group critical illness is not in the table because the sources we checked do not state its premium treatment.

03 · Claims

What group cover paid out

GRiD, the group risk industry body, reports that group risk benefits gave employees and their families a record £2.69bn of financial support in 2025 (GRiD ↗).

Across group and individual protection, the ABI and GRiD reported a record £8bn of claims in 2024 (ABI ↗).

For health insurance, the ABI says insurers processed a record £2.6bn of claims for workplace schemes in 2024 (ABI ↗).

Group life assurance£1.8bn
Group income protection£670.7m
Group critical illness£190.8m
Claims paid by UK group risk policies in 2025, as reported by GRiD. Industry totals, not any one insurer. GRiD ↗
04 · Setting it up

How to set up an employee benefits package

One benefit is a legal duty: GOV.UK says employers have to provide a workplace pension scheme for eligible staff as soon as their first member of staff starts working for them (GOV.UK ↗).

The insurance benefits are a choice.

For death in service, Legal & General says most UK employers offer between 2 and four times salary (Legal & General ↗).

Before you buy, the FCA tells consumers to check the firm on its Firm Checker (FCA ↗).

01

Duty

Start with the workplace pension

The one benefit the law requires for eligible staff.

02

Choose

Decide what each cover is for

A lump sum for families, an income while off sick, or faster treatment.

03

Eligibility

Agree who is covered

Aviva says all eligibility rules have to be agreed with the provider.

04

Quote

Get quotes from authorised firms

From insurers or an FCA-authorised adviser. Check the firm first.

05

Report

Report the taxable benefits

Medical insurance goes on a P11D, with Class 1A National Insurance.

Steps summarised from GOV.UK (GOV.UK ↗), Aviva (Aviva ↗), the FCA (FCA ↗) and GOV.UK's P11D rules (GOV.UK ↗).

05 · Related

Protecting the business, not just the staff

Employee benefits look after staff and their families.

If the business depends on one person, key person cover is owned by and pays the business (Legal & General ↗).

Employee benefits for small businesses →Employee health insurance →Business protection insurance →Key person vs relevant life →Key person risk check →
06 · Sources

Check it for yourself

Every claim on this page is our summary of one of the documents listed here.

We last checked them against the live sources on 28 September 2026.

The documents are the authority, not this page.

Insurers and HMRC update them, so validate any figure or condition at its link before you rely on it.

Questions

Employee benefits insurance, answered

Insurance an employer provides for staff on top of their salary.

Aviva describes group protection as a policy employers can offer employees as a benefit on top of their salary, which can include group life insurance, group income protection, group critical illness cover, or any combination of the three.

Private medical insurance and relevant life cover are also provided this way. Aviva ↗

HMRC treats them differently.

Employer-paid life cover for any individual or registered charity beneficiary is not a taxable benefit in kind; Royal London says the same of relevant life premiums.

The right to insured sick pay is not a chargeable benefit, but the income paid is taxed as earnings.

Employer-paid medical insurance is chargeable on the employee and reported on a P11D.

Ask your accountant how this applies to you. HMRC policy paper ↗

We cannot tell you what to offer: that depends on your business, and an FCA-authorised adviser can help.

The one the law requires is a workplace pension: GOV.UK says employers have to provide a workplace pension scheme for eligible staff as soon as their first member of staff starts.

Insurance benefits are a choice. GOV.UK ↗

We do not publish prices, and the insurers we checked do not publish group rates: each scheme is quoted on its own terms.

For medical insurance, GOV.UK says the value to report on a P11D is the cost to you of providing it, and Class 1A National Insurance is due on that value. GOV.UK ↗

Beta · information only

Does the business depend on one person? Size the key person cover.

Employee benefits protect staff. Key person cover protects the business; the calculator works through the methods UK insurers publish.

01Earnings, profit and loan methods

02Insurers’ published multiples, with sources

03No email, no quote, no sales call

Information, not advice

We are not an insurer, broker or regulated adviser, and we do not give quotes or recommend a policy. For regulated advice, use an adviser authorised by the FCA.

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Not financial advice. This page is general information. Before buying insurance, the FCA tells consumers to check the firm on its Firm Checker (FCA ↗). For free guidance, see MoneyHelper.