Death In Service Life Insurance

If you work in a potentially life-threatening occupation, you may have already considered taking out a life insurance policy to protect your loved ones in case the worst happens to you.

However, you may have found it difficult to find cover for your circumstances, due to the increased level of risk your job incurs.

Death in Service Life Insurance, therefore, is a specialist insurance product designed to help people who work in a range of dangerous occupations.

Find out more about how this insurance works and what you should consider before finding a suitable policy for your needs.

What is Death in Service Life Insurance?

This cover is often added to an employee’s benefits package when they start at a new company. For employers looking to insure their staff in this manner, you would be looking at Group Life Insurance policies. This insurance is designed to pay out a lump-sum to an employee’s family in the event of their death whilst performing their job role. This makes it a similar product to life insurance, only the cover lasts just for as long as the employee is working within a role. Therefore, if an employee were to retire, or leave the company, the family would no longer be eligible for a lump sum payout upon death.

The amount of cover employees can claim for varies but may be a multiple of their normal salary (say, from three to five times).

Under an employer’s agreement, they would pay towards their staff’s premiums every month and decide their level of cover. If the employee then wanted additional cover, they could choose to seek out their own policy.  When taking out a policy, each employee would fill out a medical information questionnaire. Premiums will then be worked out by underwriters to determine the levels of cover for employees. As with an individual premium calculation, the younger and healthier you are, the less you may pay towards your insurance premiums. It is also possible that some employees may have to undergo a medical examination to join the group policy.

If you would like to find out more about different life insurance types and look at some frequently asked questions, take a look at our guides.

Should I Consider taking out Group Life Insurance for My Employees?

  • Group Life Insurance is purchased as a single policy, split across a group of people, in most cases. It can also be purchased as a single policy, covering just one person.
  • These policies can also be linked to a company pension scheme.
  • Group Life Insurance can incentivise staff, attract high-level candidates to new roles and encourage loyalty to your business.
  • You may want to consider insuring your employees for three to four times their annual salary. This is a guiding figure and average across the Group Life Insurance market. You can, of course, opt for a higher amount of cover for some or all your employees.

Let’s Look at a Death in Service Life Insurance Example:

Jonas started working as an installation technician for a travelling theatre company. In his employment package, he was offered Death in Service cover for three times his annual salary. This would be £150,000 to his family as a tax-free lump-sum, if he were to die during his employment there.

As he needs more than that to cover the amount left outstanding on his mortgage loan, Jonas looks to buying an additional life insurance policy for himself. Covering himself for the additional funds worked out cheaper for him than seeking out a single policy to cover his entire mortgage and other debt commitments, in the event of his death.

What are the Benefits of Death in Service Cover?

  • Cheaper than Life Insurance – In many cases, the amount you pay towards premiums with this type of policy may be less than the typical premiums charged by a conventional life insurance plan.
  • Peace of Mind- For those with a family, this cover puts your financial stresses at ease. If you were to die doing your job, your family’s wellbeing would be protected.
  • Cause of Death – Your cover may extend to a payout upon death, even if you do not die in a work-related incident. Some companies will offer this cover to you simply because you are on the payroll.
  • Bereavement Support – A commonly found extra in these schemes is bereavement support services for families. This can be helpful to people at a very difficult time in their lives.
  • Incentives – A benefits package that includes some sort of Death in Service insurance can attract the best employees to your job role. I can also incentivise existing employees to stay at your company for many years.
  • Written in Trust – Many of these policies are written In Trust. This means that any funds released will be transferred to the policy holder’s beneficiaries directly. This may prevent your loved ones from having to pay inheritance tax on your estate. Although, please check this with a legal expert.
  • Probate Helplines – As well as a bereavement service, some policies will also include a free advice service to families, to help them manage their loved ones’ estate.

What are the Pitfalls of Death in Service Cover?

  • Employee Cover Only – If you leave the employer that offers you this type of cover, your entitlement will end the day you leave that company. In cases of buying your own life insurance policy, the older you are, the more likely it will be that you will have to pay more for your insurance premiums. Please bear this in mind when looking at employee benefits packages. This cover may protect you to an extent, but you may also require further financial protection in the form of a personal life insurance plan.
  • Pension Related – In some cases, you will also need to be included in your company’s pension scheme, in order to benefit from Death in Service cover. This may not be true in all cases. Please check with your company’s human resources department.  
  • Not Enough Cover – Many Death in Service policies offer three to four times your annual salary, as a payout to families. For some people, this may not be enough to keep their families afloat. It is possible therefore that you may need to purchase additional, individualised life assurance cover.

What are the Alternatives to Death in Service Insurance?

  • Decreasing Term Life Assurance – Death in Service payouts may be less than your mortgage balance. Therefore, if you were to seek a decreasing term life insurance product, you could protect your mortgage loan exclusively with the policy and pay less towards your premiums with the decreasing level of cover.
  • Whole of Life Assurance – If you worry about your family’s futures after your retirement, you may want to look at whole of life insurance. These guarantee a payment to your will beneficiaries upon your death. The premiums for these policies are usually higher and can increase with age. However, your family will receive an insurance payout on your death, whenever that may be.
  • Other Insurance Products – In terms of financial protection for a number of circumstances, you may want to look at Income Protection Insurance, Critical Illness Cover and Mortgage Insurance.

If you would like to find out more about Group Life Insurance and how it may benefit your employees, get in touch with an insurance broker. They can offer you a free, no-obligation quote and advice for employers.

I needed life insurance and critical illness for myself and my wife. I got a number of quotes from some of the big brands and was very happy with the final price. Mike Davidson, Birmingham

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