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What is death in service?
'Death in service' is a benefit that some people get from their employer. If you die while working for your employer, they’ll pay out a fixed sum to your dependents.
This can be a reassuring benefit, but it’s not quite the same as life insurance. How it’s paid out, and the amount, can differ.
Payout amounts can vary between employers. The payout is usually a multiple of your annual salary and is intended to help your loved ones financially if the worst happens.
Not every employer offers benefits packages, and not every package will include death in service. Check your contract or staff handbook to see if you’re covered.
How does it work?
Death in service commonly pays out a tax-free sum to your dependents if you die while employed. This sum varies according to the benefits package you’ve got, but it’s often somewhere between two and four times your salary. That means if you earn £40,000 a year, your death in service benefit could be £80,000 - £160,000.
The name ‘death in service’ can sound a little misleading, so let’s clear up just what it really means. You don’t have to literally die while you’re in the office, or as a direct result of working, for death in service to pay out. It just means you need to be employed by the company at the time of your death.
The advantages of this include the fact it’s usually free as part of your work benefits and gives your dependents a tax-free lump sum when you die. But there may be conditions attached to your death in service benefit that could leave you at a disadvantage.
For a more detailed description of the details, read the Unison guide to death in service.
Do I have death in service cover?
The best way to check if you have death in service cover is to consult your contract, employer or the benefit provider that they use to ask them about the specifics of your benefits package. They’ll be able to tell you if you have death in service cover as part of your employment contract.
It can be linked to your work pension scheme, so find out if you need to enrol in the pension scheme before you can earn the death in service benefit. Check Money Helper to read about how these two benefits can be linked.
When you investigate, it could be worth asking extra questions about your benefit. For instance, do you have control over who receives the payout or does the employer decide? And is the payout guaranteed to go to your nominated person?
Do I need death in service and life insurance?
Both death in service and life insurance give your family a lump sum of money if you die. But they work in different ways.
- With death in service, the amount is set by your employer. It usually depends on your salary and doesn’t take into account things like your mortgage, debts or the cost of raising children
- With life insurance, you choose how much cover you want. You can base it on your family’s needs, like bills, a mortgage or rent and day-to-day costs, so they’ve enough money to get by without you
That’s why many people have both. Death in service is helpful, but it might not be enough on its own. It’s important to:
- Check what your death in service benefit includes
- Think about what your family might need
- Work out how much cover you need. Our life insurance calculator can help with that
Remember, if you leave your job, you usually lose your death in service benefit. Life insurance stays with you, no matter where you work, for the length of your policy’s term. So having your own policy can give your family extra protection in case your next employer doesn’t offer the same.
Key takeaways
- Death in service pays a tax-free lump sum to your dependents if you die while employed. It’s usually based on a multiple of your salary
- It’s a useful workplace benefit but isn’t a substitute for life insurance, which lets you choose the cash amount paid out if you die based on your family’s needs
- Check your contract to see if you’re covered and consider getting life insurance too. Especially as death in service usually ends if you leave your job
Take steps today to protect what matters
Common questions
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Even if your job gives you a death in service benefit, you might still want life insurance. Many people have both.
Death in service is useful but it might not be enough to look after your family if you die. It may not cover all your mortgage, debts or the cost of raising children.
If you have this benefit, here’s what you can do:
- Find out how much money your death in service benefit would pay
- Ask yourself if that amount is enough for your family to live on
- If not, or if you want extra cover, life insurance can help fill the gap
Life insurance lets you choose how much money to leave behind, so your loved ones are better protected. Use our life insurance calculator to work out what you’d need to leave.
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The main downsides are that you don’t choose the cover amount, and you usually lose it if you leave your job. It also might not cover all your family’s costs, like housing, bills and childcare, if something happens to you.
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The money from a death in service payout usually goes to your dependents, the people who rely on you financially. This could be your partner, children or anyone you’ve chosen to receive the benefit.
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Each employer’s policy is different. Some may not pay out if you’re no longer on the payroll. This might be if you’re on unpaid leave or have left the company. It’s a good idea to check the full details of your scheme with your employer or benefits provider.
- Read more
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There isn’t one set amount. The payout is usually a multiple of your salary, often two to four times what you earn each year. But this can vary depending on your employer and the benefits they offer.
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No, death in service only pays out after you die. If you’re diagnosed with a terminal illness, it won’t usually provide any financial support before death. In contrast, life insurance policies often include terminal illness cover as standard, which can help in that situation. And you can usually add cover for critical illnesses, which pays out if you’re diagnosed with a serious condition that affects your ability to work.
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Yes, they’re separate things. Death in service is a lump sum payment made if you die while working for your employer. A pension is money you save for retirement, which hopefully you’ll benefit from while you’re alive. Some pensions may also have benefits that pay out if you die, depending on the scheme.
Our life cover products
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Life insurance
Choose between level, decreasing or increasing term insurance, each designed to offer you peace of mind based on your circumstances.
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Over 50s life cover
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