The benefits of death in service insurance

Dying while still at a working age is always a particular tragedy both for the individual and their family. Death in service insurance may help the family and next of kin deal with at least some of the issues that may arise in such situations.

Death may mean financial hardship to those left behind

Certainly, death isn’t the easiest of subjects to think about, which is strange given that it is inevitable for all of us.

Yet a significant number of people may be likely to die through illness or accident long before they expect to.

Sad as that would be for us as individuals, it may also have a powerful and traumatic effect on our families. Not only would they be trying to cope with the grief and mourning, they may also be suffering badly as a result of loss of income.

Perhaps that’s the most frightening thought of all – that our loved ones start suffering major financial hardship as a result of our death.

Death in service insurance – individual considerations

Some employers provide insurance that will pay out lump sums to your next of kin if you are unfortunate enough to pass away while on the payroll. This is typically a very cost-effective way of obtaining such cover compared to purchasing a private life policy – and the formalities (eg. medicals) may also be more straightforward.

The conditions covered and benefits paid will vary depending upon the employer and the nature of their scheme. Many of these schemes are non-contributory (some may require a small contribution) and they constitute a major benefit of employment.

Depending upon the exact nature of the scheme and circumstances, payments under such schemes may or may not be considered a taxable benefit by HM Revenue & Customs.

It is also possible to purchase a life assurance policy privately if your employer does not provide such a scheme. Although not common, some providers also refer to such policies as death in service cover.

Death in service insurance – corporate considerations

As an employer, the cost of offering such a scheme to employees may be easily outweighed by the benefits.

Many employees like to feel that someone is thinking about their family and future.

Providing such ancillary benefits may well significantly increase employee loyalty and commitment to your organisation. It may also prove to be a useful aid in helping employees to think about the breadth of their employment benefits rather than focusing exclusively on salary.

The premiums paid are also typically allowable as a business expense – which may in some cases be tax efficient (there may be variations depending upon the nature of the scheme and checking this carefully is advisable).

All in all, providing death in service insurance to your workforce may yield major mutual benefits.