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Death in service cover

Compare quotes for death in service cover with our preferred provider ProtectMyPeople[1]

  • Death in service cover pays out if a staff member passes away
  • Compare quotes to find the right cover for your employees 
  • Offer your staff peace of mind by offering death in service as a company benefit 

Life insurance: Hands holding a red heart

Compare quotes for death in service cover

Death in service benefit could give employees and their families peace of mind should the worst happen. But what is it exactly? Let’s find out.

Key points

  • Death in service benefit pays out a sum of money to your employee’s chosen beneficiaries in the event of their death. The death doesn’t have to be work-related, the staff member just needs to be working for your company when they die
  • This benefit isn’t subject to inheritance tax, as it’s kept in trust by your company. Employers will also benefit from some tax relief, as death in service is usually classed as a business expense
  • Beneficiaries will receive between two to four times your employees annual wage, or maybe more, depending on the policy taken out by the company

While salary bonuses, extra holiday days, free lunches and shopping vouchers are fun incentives for employees, what about something that benefits their families when they might need it the most?  

As an employer, you could consider offering death in service benefit to your employees. Although this shouldn’t necessarily be viewed as a replacement for life insurance, it could offer your staff some peace of mind. 

Let’s get you clued up on death in service benefit, so you can relax knowing what it means and how it could benefit your company, your employees and their families.  

What is death in service benefit? 

Death in service is a benefit that’s organised by your company, so employees don’t have to pay for it. The benefit pays out a sum of money in the event of a staff member’s death, if they’re still working for the company when they die.  

The death doesn’t have to be due to any work-based activity – they just need to be on the company’s books as an employee.  

Death in service benefit is also known as group life assurance.  

Sometimes, death in service benefit can be linked to the workplace pension, so your staff would need to be enrolled in your company’s pension scheme to benefit. Compare policies to find out what would work best for your company and your employees.  

Most big employers have death in service benefit, like the NHS, the armed forces – even Lloyds Bank and Morrisons. But it’s an affordable benefit for any sized company. 

From your employee’s perspective, how much your company’s death in service benefit pays out will determine whether it’d be worth them investing in individual life insurance policies to fully cover their family or beneficiaries’ needs.  

Who receives death in service benefit? 

The employee’s family or chosen beneficiaries will receive the sum when they die, provided the staff member is still working for the company at the time of their death.  

Is a death in service benefit taxable?  

The sum that your employee’s family or beneficiary receives is tax-free because the policy is kept in trust by your company, and isn’t subject to inheritance tax. It doesn’t need to be entered on your P11D form.  


Death in service premiums tend to be classed as a business expense so your business would benefit from corporation tax relief, and – in July 2018 – Insurance Premium Tax isn’t charged either.  

For personalised tax advice, talk to a financial advisor, as they’ll be able to give you the full ins and outs of death in service benefit and tax.

How much does death in service benefit pay out? 

The amount a beneficiary gets with death in service is usually between two to four times your employee’s yearly salary, but it could be more: it’s up to you as the employer to set the amount. 

If your employee earned £20,000 a year, for example, their family could be entitled to a tax-free sum of £40,000 to £80,000.  

What do employers gain from providing death in service benefit? 

Making death in service cover available for your employees provides security for your workforce and their families, and shows that you’re an ethical and conscientious employer.  

Death in service cover can be provided for businesses of all shapes and sizes – from two employees to over 500. So you don’t have to be a big business to provide this benefit. 

A benefit like this could also help with staff recruitment, as it’s a long-term benefit. Staff are more likely to want to stay with your company too, so they don’t lose their death in service benefit.  

Death in service benefit and life insurance  

The payout for death in service benefit tends to be smaller than that of a life insurance policy. As such, your employees might think it’s worth getting an independent life insurance policy to make sure they’re getting the cover they need.  

Death in service benefit used to have the same fixed age (65) as the state pension. Now the fixed state pension age has been removed, death in service benefits should indicate they run until “age 65 or state pension age”, whichever comes later.  

A death in service benefit might be considered when your employees apply for life insurance, which could reduce their premiums – nice!  

The good and bad of death in service benefit 

For a final round up, here’s some pros and cons of death in service benefit for employees and employers alike.  



  • The sum paid out is tax free 
  • It’s usually free to employees as a staff benefit 
  • It could bring extra peace of mind for your employees, their family or beneficiaries 
  • Staff can get up to four times their yearly salary, or maybe more 
  • Gives your company extra incentive to help with staff recruitment and retention  


  • The payout is usually smaller than a life insurance policy, so it may not cover all your employees’ need 
  • As a staff member, you only qualify for cover if you’re an employee of a company that provides the benefit 
  • The benefit might be tied to the company’s pension scheme 
  • Employees don’t have control over the policy details, like the payout amount – although this could be a positive for employers 

If your company has a death in service benefit, it’s up to your employees to decide whether it’s worth taking out an individual life insurance policy in addition to the benefit.  

Before you or your employees sign up to any life insurance scheme, consult a financial advisor for personalised, up-to-date financial advice, and encourage your staff to talk to their family or beneficiaries to find out what could work best for them.  

By Amy Smith