A simples guide

Death in Service Insurance Cover

Often offered within your employer’s benefits package, death in service cover pays out a lump sum if you pass away while you work under the company’s employment. It’s completely different than life insurance as it generally ends when you leave the company. A life insurance policy, however, will remain in place as long as you continue to pay the premium. So, if your employer offers Death in service insurance, does that mean you don’t need life insurance? Let’s find out.

What is death in service insurance?

As mentioned earlier, death in service insurance is typically a part of an employment benefits package. It offers financial protection for your loved ones should you die while in service of a company. It can help to provide peace of mind, knowing that your family will have some financial assistance in the event of your untimely death.

However, it’s rarely as expensive as a traditional life insurance policy and there are a few risks that you must keep in mind when your employer offers you death in service cover. These include:

- Death in service is normally a multiple of your salary – whether this covers enough expenses or not depends on your family’s outgoings

- If you leave the company that provides death in service cover then you will no longer be protected

- You may not know who will receive this benefit if you die, as they often fall under a discretionary trust

- You cannot typically assign this benefit to cover mortgage payments

- If you take out life insurance at a later date, you may face higher premiums, due to your increased age or any health conditions you have suffered before opting for a life insurance policy

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

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

As with anything relating to your employer, this varies. The amount paid out in the event of a death in service claim depends entirely on the terms and conditions set out by your employer. Often, you can expect the amount to be paid out to sit at around 3-5 times your annual salary.  In terms of life insurance, calculating how much cover you’ll need is up to you. There’s no right or wrong cover level, your situation could change in the future which may mean you need more or less cover.

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 death in service.

death in service insurance cover

Does death in service mean that you can forego life insurance?

A payment of three to four times your salary may seem enormous at first glance. It probably is, in all fairness. The old saying is, however, “don’t place all of your eggs in one basket” and this applies here. If you leave the company, whether intentionally or not, then your loved ones will no longer be protected. Obviously, that isn’t desirable. If this seems like even a faint possibility then it is definitely worth considering a more traditional life insurance policy.

The fact of the matter is that a combination of the two is the best method of ensuring the financial future of your loved ones.

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Where can I find the best option for me?

We have teamed up with some of the best death in service and life insurance providers that you can find in the UK. By using our comparison service, you can help to secure the financial stability of your family if the worst should happen.

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