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Death in service cover

Death in service cover

Death in service cover pays out a lump sum if you pass away while employed by your company. Learn about how death in service benefits can offer your family peace of mind financially, and find out how it differs from life insurance.

Kamran Altaf
From the Life team
3
minute read
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Posted 17 JULY 2020

What is death in service insurance?

Death in service insurance is a type of cover that can be offered as a benefit by the company you work for and pays out a lump sum of up to five times your salary if you die while in their employment.

You would have to be on the payroll at the time of death to qualify for a payment. Unlike  life insurance,  death in service cover ends if you leave a company. If you lose your job or move employers, you’ll no longer be protected. As with most insurance policies the cost of a policy depends on your age, health, lifestyle and other factors.

Why should I think about getting this type of insurance?

It could be, and often is, cheaper than a regular life insurance policy. However, there are a few factors to consider when your employer offers you death in service cover, including:

  • Your pay-out is normally worked out as a percentage of your salary – so be sure the lump sum meets your family’s outgoings in the future
  • You may not know who’ll receive this benefit if you die, as the benefit may fall under a discretionary trust
  • You cannot typically assign this benefit to cover  mortgage  payments

Since death in service is a benefit, the full details will vary depending on your employer and the overall value of your benefits package.

What is the average pay-out for death in service?

That depends. The amount paid out in the event of a death in service depends entirely on the terms and conditions set out by your employer. Often, you can expect a pay out to be around 3 to 5 times your annual salary.  

Do note that if your employer offers a flexible benefits package, you may be able to increase the death in service pay-out by taking a reduction in salary. You could reduce or even remove other benefits to see a higher pay-out from this benefit.

So if I have death in service cover, does that mean I don’t need life insurance?

Not necessarily. Although a payment of three to five times your salary can look rather generous at a first glance, you’ll need to know how long that sum will keep your family or dependants protected. Whether or not your current job is stable, you might be better off learning first about all your options and read our information hub on life insurance.

Also, it’s worth keeping in mind that – by not having life insurance today – you’re at risk of higher payments in the future if you take out a policy later in life. That’s because people often face higher premiums as they age. That’s particularly true if you have health conditions you’ve suffered from before you opted for life insurance. Learn more about pre-existing medical conditions and how they could potentially affect your insurance.

Remember, each policy will be different so it’s crucial that you read any policy terms with care. It may be that a combination of the two is the best method of ensuring the financial future of your loved ones.

Where can I find the best option for me?

You might wish to start by looking at some quotes for life insurance. Our premiums start from £25.84** a month.

Go on, help secure the financial stability of your family now.

**50% of people could achieve a quote of £25.84 per month for their life insurance for up to £100,000 worth of cover based on Compare the Market data in May 2020.

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