What is a death in service benefit?
This guide is for informational purposes only. You cannot buy death in service cover through MoneySuperMarket.
Key takeaways
Death in service cover is typically a tax-free lump sum payment, paid to your nominated beneficiaries if you die while employed; it can help cover costs such as mortgage repayments, household bills or childcare
Death in service benefit payments depend on you still being employed and usually end if you leave the company or are terminated
Death in service is an employer-funded workplace benefit, offered as part of the employee benefits package, so you won’t usually pay for it through deductions from your salary
What is death in service benefit?
Death in service is an employee benefit offered by some employers as part of their workplace package. It pays a lump sum to a nominated beneficiary, such as your spouse, partner or another loved one, if you die while working for the company. This payment is typically tax-free.
Death in service payments are often funded through group life insurance policies arranged by your employer. They don’t usually count as part of your estate for inheritance tax purposes.
However, from April 2027, inheritance tax rules are changing, so it’s worth checking how your employer’s scheme is affected.
Does an employer have to pay death in service benefit?
No. Employers are not legally required to offer death in service. It is an optional benefit that some employers provide, often through a group life insurance policy, or as part of a workplace pension scheme.
How does death in service cover work?
Death in service benefit is offered as part of an employee’s benefits package – so is not deducted from your salary. If you die while employed by the company, a lump sum is usually paid to your nominated beneficiaries.
The benefit may often be held in a ‘discretionary trust’, with the scheme trustees deciding who receives the payment, taking your nomination into account.
The amount is usually a multiple of your annual salary, such as four times your earnings. While the death doesn’t need to occur at the workplace, or be work-related, the employee must be on the payroll at the time.
Who can claim a death in service payout?
Death in service benefits are usually held in a discretionary trust. If you die while employed, the scheme trustees decide who receives the payout, though they will normally take your wishes into account.
In most cases, the money is paid to your nominated beneficiaries, such as your spouse, partner, children – or another loved one.
To ensure the money goes to the people you want to benefit, it’s wise to complete what is known as an ‘expression of wishes’ or ‘beneficiary nomination’ form.
This paperwork sets out who you’d like to receive the money if you die. It’s important to keep this form up to date if your circumstances change.
What is the average death in service payout in the UK?
There isn’t a standard average payout. Most death in service schemes pay a lump sum worth between two and four times an individual’s annual salary – though the amount varies by employer.
How do I calculate death in service benefit?
To calculate a death in service benefit, identify the multiple (usually between two and four times) your annual salary; this will be specified by your employer. Then, multiply your current annual salary by that multiple.
For example, if your salary is £35,000 and the multiple provided by your employer is three times salary, the death in service benefit would be £105,000.
Does death in service cover mortgage payments?
While most death in service benefits are a multiple of your salary, it is unlikely the payout will be enough to pay off the full mortgage balance.
The benefit is usually based on a multiple of your salary, as opposed to the amount you owe on your mortgage. So, if you want your mortgage debts to be paid off if you die, you may want to consider a separate life insurance policy.
What's the difference between death in service and life insurance?
Life insurance allows you to choose the level and length of cover you need, and where you would like your money to go.
It remains in effect regardless of your employment status. By contrast, death in service cover is an employer-provided benefit that typically pays out a lump sum if you die while employed by the company – and usually ends with your job.
A life insurance policy can also be combined with other types of protection, such as critical illness cover.
Here are some key differences:
Life insurance | Death in service benefit | |
|---|---|---|
Purpose | Provides financial security for dependents | Acts as an additional benefit tied to employment, not a standalone policy |
Who provides it? | Offered by insurance companies and purchased individually or via an employer | Provided exclusively by an employer as part of an employee benefits package |
Cover period | Valid as long as premiums are paid or until the policy term ends | Cover only applies while the individual is employed by the company offering the benefit |
Amount paid | Chosen by the policyholder (e.g., a fixed amount or multiple of annual salary) | Typically a multiple of the employee’s annual salary (e.g., 2 times, 4 times, etc.) |
Can I keep the cover if I change jobs? | Yes, the policyholder retains it even if they change jobs (if individually purchased) | No, the benefit ends when the employee leaves the job |
Can I change my cover? | Yes, options for critical illness, policy terms, and more | No, fixed terms, which generally determined by the employer |
Cost | Premiums are paid by the policyholder (or employer if provided as a benefit) | Employer-funded; no cost to the employee |
Tax | Beneficiaries typically receive payouts tax-free (subject to local tax laws) | Payouts are generally tax-free under most circumstances |
Each has its own advantages, but life insurance offers more flexibility and control over the length and level of cover, while death in service benefits are a convenient, employer-funded benefit.
How long does it take to get the money from death in service?
It can take as little as two weeks for a death in service payment to be made, but some families may have to wait a month or more. Delays can occur due to missing paperwork or the need for an investigation into the cause of death before the claim can be paid.
Does death in service apply if I’m off sick or on leave?
Usually, yes. As long as you are still employed and on the payroll, you should be covered. This typically includes long-term sick leave, maternity leave, paternity leave, or parental leave, but the exact rules depend on your employer’s scheme.
Is death in service paid through probate?
No, in most cases it is not. Death in service benefits are usually held in a discretionary trust, which means the payout does not form part of your estate and does not go through probate.
Do I need a will for death in service to be paid out?
No. A will is not required for the payout itself. However, keeping your ‘beneficiary nominations’ form up to date is important, as trustees will normally take these wishes into account when deciding who receives the benefit.
What happens if I don’t name a beneficiary?
If no beneficiary is named, it is down to the scheme trustees to decide who receives the money. They usually consider close family or dependents, but this can delay payment and could mean the money isn’t distributed according to your wishes.
Will death in service cover end if I leave my job?
Yes. In most cases, death in service cover ends when you leave your job. It is linked to your employment, so if you change jobs, or if you are made redundant, or resign, the cover usually stops.
Some employers offer a ‘continuation option,’ but this is uncommon.
How do beneficiaries claim a death in service payout?
Beneficiaries don’t usually need to make a formal claim. The employer will contact the scheme trustees, who then decide who should receive the benefit.
Compare life insurance quotes with MoneySuperMarket
Taking out life insurance can help ensure your family is protected whatever happens in your working life. If you want to look into taking out a policy, you can compare life insurance quotes quickly and easily with MoneySuperMarket.
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