What is Death in Service?

If you have ever wondered “Just what is death in service?”, read on to learn everything you should know about it…

What is Death in Service and When Does a Policy Pay Out?

Death in service, a type of benefit provided by employers, provides eligible employees’ families with a tax-free cash lump sum if the insured individual dies while in the company’s employment.

Benefits are paid out if the employee dies while working for the company. This does, however, not mean the employee must be at work/actively engaged in activities related to work at the time of his/her death. It merely means that the policy will pay out if the employee passes away while on the company’s payroll.

Most death in service plans/schemes work by payments being made into a trust. The employee usually completes a beneficiary form, stating who he/she would like the money to be paid to in the event of their death. This money can be split between a number of family members/individuals. The trustees of the scheme will manage the death claim, on behalf of the employee.

How Much is a Death in Service Pay Out?

How much a death in service payout will be, depends on the specific package offered by your employer. With most packages, payouts typically tend to range between three and four times an employee’s salary, although some may pay less and some may pay far more.

Some schemes, and especially schemes where employers offer flexible benefits, allow for death in service benefits to be increased via reduction of other benefits. Again, checking a plan/scheme’s terms, conditions and other small print is important to make sure you know what you are eligible for (or not, as the case may be).

Additional Insurance Cover

Please note that while death in service cover may appear adequate at first glance, it may be insufficient to cover funeral/other related expenses, mortgage repayments, etc., so to make sure your family/financial dependants are adequately protected if you should die unexpectedly, you may require an additional, separate life insurance policy.

You may also want to consider critical illness cover (available as a life insurance add-on or as an individual policy) to secure your/your family’s financial security in the event of you developing a critical illness.

Contact Us

Spectrum FA can help you determine your best, most affordable death in service, life and/or critical illness insurance options. To learn more, give us a call on 01279 315 013, use our contact form or e-mail us at: info@spectrumfa.co.uk.