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Death in Service Insurance or group life insurance is a type of life insurance that employers provide for their employees. It is designed to provide financial security for the employee’s family and loved ones should the employee pass away while employed by the company.
It can be an invaluable asset for many families who may not have other sources of income. This article will explore what Death in Service Insurance is, how it works and why it is important for employers to offer this type of benefit to their staff.
Death in Service Insurance pays out a lump sum upon death to the employee’s loved ones. The amount of money paid out will depend on how much coverage the employer has purchased and how long the employee has been with the company at the time of death.
The payout can be used by the family to cover costs such as funeral expenses or living expenses if they no longer have a source of income following their loved one’s passing.
While the above are all undoubtedly important factors in the ongoing success of your business, it would be churlish to overlook the contributions that your employees at all levels make to the ongoing success and prosperity of your operation. While you make sure that they are well remunerated for their efforts and have access to the ongoing training and professional development that they need to excel, it also behoves you to ensure that their families and loved ones are protected if the worst should happen.
This is why many entrepreneurs offer their employees Death In Service benefits so that they have the peace of mind that comes from knowing the people who mean the most to them will be financially protected when they are no longer there to provide for the family.
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Death in service policies typically pay out a lump sum equal to 1-4 times the employee’s salary, depending on the policy. This money can be used to pay for funeral costs, medical bills from the deceased’s illness, debts and other day-to-day living expenses. It also provides families with an additional source of income if they rely on money from the deceased’s salary to make ends meet.
Some providers even offer additional benefits such as counselling services for bereaved family members and dependents. Policies typically have no upper limit on how much they will pay out and don’t require a medical exam or health questionnaire. They are often tied into an employer’s existing life assurance scheme and usually cover all employees, regardless of age or length of service with the company.
Death in service policies offer peace of mind that should an employee die while working for a company, their family will receive financial support during what can be a very difficult time.
Death In Service is not a statutory requirement for businesses. Nonetheless, there are many good reasons why businesses of all shapes and sizes should seriously consider it for the good of individual employees and the business as a whole.
Offering a Death In Service benefit makes businesses highly desirable to prospective employees and this in turn can allow your organisation to attract the kind of top-drawer candidates to fill a range of positions to facilitate operational excellence and see the business go from strength to strength. It can give your operation a competitive edge in your market. If your competitors do not offer this as a benefit, you will be more likely to recruit the most outstanding talent at their expense.
It can also be a superb morale booster. It shows your employees that you genuinely care about the well-being of their loved ones and this can go a long way towards ensuring their loyalty now and in the future.
Under current UK tax laws, your Death In Service premiums are also (under most circumstances) an allowable business expense allowing you to protect your employees without restricting your cash flow.
If you work for the NHS, you may be eligible for its own death in service benefit. For people who are current NHS pension scheme members, this is available. Beneficiaries should receive the benefit if you pass away while working for the NHS. Further information is available on the NHS website.
For companies smaller than 10 employee’s we would sometimes recommend a relevant life insurance policy instead. You can find out more about relevant life insurance.
So let’s explore how much money you can expect when it comes to death in service benefits.
Typically, death in service plans will provide lump sum payments of between two and four times your annual salary upon your death while employed at a company or organization.
This money is meant to go towards any outstanding debts or bills that you have and also cover funeral costs so that your family does not have to worry about them during their time of grief.
Additionally, many employers also offer bereavement counselling services for those close to the deceased employee as well as other forms of support such as flexible working hours or extra days off work should they need them.
The amount received from death in service insurance can vary greatly depending on the provider and the policy itself so it’s important to check with your employer what type of plan is available for you and make sure that any dependents are covered too.
It’s also worth exploring any additional benefits that may be included such as medical expenses or income protection which could offer further protection against unexpected events like serious illness or injury while still employed.
When a claim is made, the process begins immediately. The insurer will require some documentation such as a death certificate, proof of identity and any other relevant paperwork. Depending on how quickly this information is received and processed, pay out can happen within a few weeks or months.
However, if there are any complications with the claim or additional research required, it may take longer for the payment to go through. Ultimately, each case varies but the team handling the claim will do everything they can to ensure that things proceed as smoothly as possible during such a difficult time.
Death in service insurance is a valuable benefit for both employers and employees. It’s a great way to provide financial security for the family of an employee who passes away while still employed, and it can be relatively inexpensive to obtain.
It’s important to understand how death in service works and what benefits are available so you can make an informed decision about whether or not it’s right for you. With some research, you can find the right coverage that ensures your loved ones will be taken care of if something were to happen to you while employed.
Death in service gives peace of mind knowing your family won’t suffer financially in the event of your untimely passing.
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That depends on the policy. Payouts usually range from 1-4 times the covered employee’s annual salary.
Yes, they can. In fact, you may want to encourage your employees to take out their own Life Insurance to supplement your Death In Service benefit. Death In Service differs from individual life insurance in a few key ways. For example
1. The cover ends when the employee stops working for you.
2. The cover cannot be changed as it is linked to the employee’s salary.
3. Employers rather than employees are the policyholders.
4. Employers rather than employees are responsible for all administration and liaising with the insurer.
Thus, while Death In Service is an extremely attractive benefit, individual employees may wish to use their own Life Insurance policy as well depending on their needs and circumstances.
Cover normally ceases when employees reach the state pension age. This is currently 64 years of age for women and 65 for men. If you have employees above this age they may not be eligible.
If you have any further questions we’d be delighted to discuss them with you and help you to find the right cover for your business. Call us today on 02071128844
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