Is Death in Service Benefit the same as Life Insurance?
Death in Service can help protect your loved ones in the event of your death? But how does it compare to Life Insurance? We take a look at some of the similarities and differences between the two.
What is Death in Service benefit?
Death in Service is a benefit that is provided by some employers. If you die whilst you are still employed by the company, a nominated beneficiary will receive a lump sum payment. The amount can vary, but is typically three of four times your salary.
Death in Service isn’t a mandatory benefit – there is no legal requirement for employers to provide this.
Is Death in Service the same as Life Insurance?
In short, no. It can be easy to confuse the two as they both provide payouts after your death.
Death in Service is only available as an employee benefit. It is designed to help your loved ones adjust financially after your death. The payout is a fixed amount, which will be a multiple of your salary.
Life Insurance is a separate policy that you arrange yourself, and has no connection to your employment. You can insure yourself for a sum of your choosing. If you die during the term of your policy, this payout could help pay off your mortgage as well as cover other living costs for your loved one.
How do I know if I am covered by Death in Service benefit?
You will only be covered by this if your employer has chosen to offer this benefit. If you aren’t sure whether you are covered by this, check your employment contract or speak to your manager or HR department to clarify.
If your employer does offer this benefit, you must still be on the payroll to qualify for a payout, however your death does not have to be work-related.
What are the main benefits of Death in Service benefit
If you are covered by this benefit at your place of work, there are a number of positives:
- Death in Service benefit is usually provided at no cost to the employee
- A lump sum will be paid out to your loved ones to help them financially
- Payments are tax-free in the event of a claim
Are there any downsides to having Death in Service Benefit?
The main disadvantage of receiving a Death in Service benefit from your employer comes if you want to change jobs. Your new employer may not offer this particular benefit, so you may need to take this into consideration.
If Death in Service is not offered by your employer then you may want to consider Life Insurance as an alternative.
What is Life Insurance and how does it work?
Life Insurance is designed to be in place to protect your family financially after your death. If you die during the term of your policy, your beneficiaries will receive a cash sum which can be used to pay off your mortgage, other debts or simply to maintain current standards of living if you were the main breadwinner.
Life cover can be arranged for a sum of your choice, can cover you as an individual or can be taken out jointly with a spouse or partner.
There are different types of Life Insurance so it’s worth researching the different types to work out which one is best suited to your circumstances. You can choose the amount and length of cover to suit your needs.
Whilst Death in Service benefit is certainly good to have if it is offered by your employer, having Life Insurance in place will offer a financial safety net that may be more practical. There is no guarantee how long you will stay in your role, but with Life Insurance the length of the policy will be defined so you’ll know how long you’ll be protected for.