Death in Service (DiS) insurance is one of the better types of employee benefits that someone in UK and other Commonwealth countries can secure for themselves. This type of life assurance is oftentimes offered referred to as group life insurance and can be taken out along with pensions, bonuses and other such financial benefits by the majority of UK companies. It works as follows: should the insured person die during the time in which he is employed at a company who provided him with said Death in Service insurance, their employer pays out a lump sum of money to a previously designated beneficiary (usually a family member).
The sum paid for this kind of life insurance typically varies between 3 and 5 times the employee’s annual salary. Around 6 to 7% of firms have a Death in Service insurance scheme of as much as 7 times the yearly salary, and in some very rare cases this can go all the way up to 14 times the employee’s annual salary. Even for a mid-level manager, that can come close to a million pounds – an incredibly generous offer. Even if the sum paid equals 4-5 years’ worth of salaries, it’s still £200,000 on average. And all of that money is entirely tax-free.
Having the security of a quarter million pounds, tax-free, in case of death, can lift the weight off a man’s shoulders, but that sum varies a lot depending on the sector or industry you work in. Those employed in the financial sector have the most advantageous Death in Service insurance policies, with 4.6 times their annual salary on average. Next in line are those working in IT, followed by highly skilled manufacturers, both with 4.4 times their salaries. Those employed in charities come next, with sales, distribution, and retailing being lower on the list, with between 3 and 3.5 times their yearly salary on average.
This is of course in line with all other types of benefits employees generally get. Bonuses and pensions are much higher in the financial sector then they are in retailing, and so, this type of life insurance is also at a higher level. Death in Service is usually tied to either the pension plan, or as a separate insurance plan made by the corporation for this specific purpose, and is a full-fledged employee benefit – you don’t have to pay a monthly premium for it; your employer takes care of all the payments.
This, however, means that you do not have as much freedom with where and when the money will be paid out as you would with typical life insurance. Whereas life insurance can sometimes be claimed in case of critical or terminal illness, DiS cannot. Also, the lump sum is sometimes paid to a different person than you originally nominated, since this is decided by the trust who manages the insurance. This does not, however, mean that your Death in Service insurance will go to a stranger- just that it could potentially be paid out to your wife instead of your child, for example.
We offer a wide range of options for death in service so please give us a call or feel free to fill in your details to get a death in service or group health insurance quote.