What is death in service insurance?

What is death in service insurance?

As an employer, looking after your staff is a responsibility you no doubt take very seriously. But sometimes life can take an unexpected turn, and a tragedy such as an employee passing away can leave families and loved ones in both emotional and financial turmoil.

Death in service insurance (also known as group life insurance) is a life insurance policy an employer takes out on behalf of their employees. It is designed to pay out a lump sum to their loved ones in the unfortunate event of their passing.

As the employer, you take out the insurance and provide it to your employees as part of your benefits package. The insurance usually covers someone during the time they are employed by your company, with the cover ending for that employee when they leave, retire or reach an age chosen by you and specified in the policy.

What are the benefits of death in service insurance?

As an employer, you already know how difficult it can be to attract and retain good employees.

Death in service insurance is a low-cost way of providing a highly valued employee benefit that could help you to stand out from your competitors during the recruitment process.

Not only that, but your employees can also benefit from the peace of mind that comes with knowing their loved ones will receive some financial support should the worst happen to them.

After all, the most important thing to your employees is their family. So, knowing that their loved ones will receive financial support that could help towards the cost of staying in the family home, or maintaining their current lifestyles in the event of their death, is no doubt reassuring.

Providing an employee benefit that really matters such as death in service insurance shows employees you care about them and their families and may have a positive impact on staff morale and loyalty to your company.

Find out more about the benefits of death in service insurance for both employers and staff.


How does death in service insurance work?

Death in service insurance works in the same way as an individual life policy in that if the insured person dies it pays out a pre-determined lump sum.

With a death in service insurance policy, the lump sum is then paid to a trust. The trustees will then administer and make payments to, the beneficiary (normally a spouse, partner, or family member). They will consider the deceased’s wishes previously expressed via their nomination form.

For more information on trusts, see our ‘What is a master trust?’ guide.

How much cover will my employees have?

The level of cover is usually based on a multiple of your employee's salary, for example two or four times their annual salary or a fixed amount.

Do I need to review my death in service scheme?

When you take out death in service insurance, the policy comes with a ‘rate guarantee’ . This is usually valid for two years. On the policy anniversary you will need to supply details about your current employees. After 2 years, when the rate guarantee ends, you may wish to review the policy to make sure you get the best possible deal for your business.

You should compare your current policy against others in the market in the same way you would your car or home insurance. Failing to consider alternative options can mean you miss opportunities to reduce the costs of your scheme or find a policy with enhanced benefits for your staff. You should also consider employees with poor health before moving your policy.

Key points:

  • The employee must be employed by your company at the time of their death for a pay out to be made.
  • The death does not need to happen while they are at work or in the workplace.
  • Cover stops once the employee leaves the company, retires, or reaches the pre-selected age specified in the policy which was chosen by you at the outset.
  • The sum paid out is normally based on a multiple of your employee's salary (e.g., 3 or 4 x their annual salary) or a fixed amount chosen by you at the outset.
  • The lump sum paid out is usually tax-free.
  • Cover may include bereavement support, counselling and probate services, although this varies by provider.

How do I compare death in service policies?

We've made the process as easy as possible, so you can get quotes from leading death in service insurance providers quickly and efficiently. All you need to do is complete a few simple steps on our online service and you can start to compare policies:

1. Tell us some details about your company

2. Let us know what type of cover you want for your employees

3. Give us some details about your employees

We'll then pass the information on to the insurance providers who will come back with quotes, usually within two working days. Some providers may not be able to return them this quickly. In these cases, we will send them to you as soon as we receive them, and within 10 working days.

Get death in service insurance quotes now, or if you'd like more detailed information about how the process works, visit our guide, 'How to buy death in service insurance'.


*Tax rules and legislation can change, and the value of tax benefits depends on your individual circumstances. This information is based on our understanding in May 2023.