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Death In Service Insurance

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What Is Death In Service Insurance?

Death in Service – also known as Group Life Assurance – is a company Death Insurance policy that provides a cash lump sum to your employees’ loved ones should they die whilst in your employment. It is an increasingly popular ‘first step’ on the ladder of employee benefits as it’s among the cheapest insurances to offer.

  • The lump sum death benefit is a multiple of the individual’s gross earnings – typically between 2 and 4 times salary.
  • The policy pays out irrespective of whether death occurs at work – for example, it could cover death from an accident on holiday or from a long-term illness.
  • It provides peace of mind for your employees, giving them reassurance their loved ones will have a financial lifeline should the worst happen.
  • Additional benefits often include an Employee Assistance Program and Bereavement Service.

Is Death in Service Cover Mandatory?

Although it tends to be the first benefit offered by a company, Death in Service Insurance is not compulsory in the UK.

It’s not something you have to provide, but there are a number of benefits to having a company Death Insurance scheme paid for and administered by the business – and not just for employees. There are benefits for both workers and companies alike.

Benefits for Employers

According to Investors in People…

  • Almost 1 in 5 UK employees are unhappy in their job due to a lack of benefits.
  • 44% of UK employees considered company benefits to be one of the most important qualities that attract them to a new company.

Meanwhile, the Chartered Institute of Professional Development reveals that 54% of people currently looking for a new job are looking for better pay/benefits, citing this as the main reason for their move.

Employee benefits can help attract and retain employees, improve employee engagement and even reduce absenteeism, especially when the cover comes with employee assistance programs (EAPs).

There are also tax advantages to offering Death in Service cover in the form of corporation tax relief on premiums.

Read Profile Pensions’ Client Story

Here’s why Profile Pensions chose Drewberry to help with their Death in Service Insurance and what it meant for their workers…
Death in Service Client Story

Benefits for Employees

Life Insurance is a popular benefit for workers. However, a recent Drewberry survey found that only around 1 in 3 UK adults had Life Insurance.

Cost is a major barrier to uptake, so having an employer pay for cover could be a major weight off many employees’ shoulders.

Workers with pre-existing medical conditions could also benefit from a company Death in Service policy, as such policies aren’t usually medically underwritten unless you exceed the free cover limit.

Death In Service policies are also written into trust from the outset so should a claim arise the benefit is automatically paid to the employee’s loved ones free from inheritance tax.

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Are We Eligible for Death in Service Insurance?

The first thing to consider when checking whether your company can take out employee Death Insurance is the number of workers you have – typically, you need at least five workers to be able to put a scheme in place.

Less than 5 employees
If your business is too small for full Death in Service, you may want to consider Relevant Life Insurance as it can be taken out for a single employee.

This offers similar tax benefits to Death in Service Insurance in that the policy is owned and paid for by the business and corporation tax relief is available on premiums.

Employee eligibility

Employees also need to be eligible as individuals to join the scheme, so you’ll have to check that:

  • They’re within the minimum and maximum entry ages of the policy
  • They’re eligible to work in the UK and have a UK working contract
  • They’re an active employee at the company providing the insurance scheme.

Some employers add additional terms before including employees in policies, such as working for the company for a set period or being above a certain pay grade / status within the company.

You can set up company Death in Service Insurance so that senior staff members get a larger multiple of salary than more junior staff members if you so wish.

Life Expectancy CalculatorA bit morbid we know, but this tool works out the risk of you passing away based on ONS Life Expectancy Data
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How Much Does Death in Service Insurance Cost?

The cost of Death in Service Cover, like any group insurance scheme, will depend largely on the demographics of your workers.

Although there’s usually no need for medical underwriting, cost will still depend on the age of the workforce, for example. An older workforce will typically increase premiums due to increased risk.

Other major factors that will determine the cost of Group Life Cover include:

  • Employees’ salaries
    Given that the benefit is based on a multiple of salary, if you have many high-earning employees you’ll likely face a higher premium
  • Your industry
    Certain industries require employees to take on riskier roles (e.g. manual work, working at heights or underwater) than would be undertaken by the typical desk worker, so premiums will be higher in such industries
  • Number of workers
    While you might think that it would cost more to insure a larger group of people, in fact certain cases insurers will offer a premium discount for groups above a certain size. Check with an adviser to see if you qualify.
death in service for employees

Taxation: Death in Service Benefit and HMRC

Death in Service Insurance for employers is generally considered a business expense, so premiums are typically eligible for corporation tax relief.

It’s also not usually a P11D or a benefit in kind for employees – which means there won’t be any additional income tax your employees will have to pay as a result of being covered.

Do You Pay Inheritance Tax on Death in Service?

In most cases, no. When the policy is set up correctly, the benefit is paid into a specially-drafted trust. As a business, you set up this trust before the policy goes live.

The money is then distributed from this trust to the employee’s family. This sidesteps any inheritance tax issues on the payout and means Death in Service doesn’t becomes part of the estate of the deceased employee.

Death in Service Trusts

As above, you need to have an appropriate trust arrangement in place alongside your Death in Service Cover to ensure the benefit is paid free from inheritance tax.

There are two ways to do this: You can set up and administer your own trust as a business or you can use an insurer’s existing master trust (where available).

Employer Trusts

  • Step 1 – Execute a trust deed
    Insurers typically provide you with model trust deeds to use, but you may wish to refer these to your legal advisers. The policy cannot start prior to the execution of the trust deed.
  • Step 2 – Register the scheme administrator with HMRC
    The trust deed appoints a scheme administrator who will need to register as the administrator with HMRC. This can take a few days if the chosen individual has never previously registered as an administrator with HMRC.
  • Step 3 – Register the scheme
    Once the administrator is appointed, it’s time to register the scheme with HMRC. This will provide you with a Pension Scheme Tax Reference Number, which will need to be attached to the executed trust deed to start the policy.

Master Trusts

Most insurers already have master trusts in place. These are already set up for you to us, so there’s no need for you to set up a trust of your own.

The administration of the trust, including reporting to HMRC and paying claims, is taken care of by independent scheme trustees.

Master trusts represent a less bespoke option, so it’s recommended you seek the appropriate legal advice before opting for the master trust route to ensure it’s suited to your company.

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Common Death in Service Questions

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    Compare Best UK Death in Service Providers

    aviva

    Aviva

    Aviva can trace its roots back to 1696, but the company as it is known today was formed via the 2000 merger of Norwich Union ad CGU PLC.

    Aviva’s Group Life cover allows employees who are part of the scheme to add a spouse / partner to the policy. The employee assistance program on offer includes discounted gym memberships and access to a 24-hour stress counselling helpline.

    • Free cover level: £5 million
    • Minimum lives: 5
    • Max. policy cease age: 75
    • Master trust: Available
    canada life

    Canada Life

    Canada Life is a Canadian company offering life, health and disability insurances for both groups and individuals.

    With Canada Life, employees’ families are provided access to bereavement and probate helplines after the death of their loved one.

    • Free cover level: £1.25 million
    • Minimum lives: 5
    • Max. policy cease age: 75
    • Master trust: Available
    ellipse

    Ellipse

    Ellipse was founded in 2009. Despite being a relatively new provider, it has since grown to insure more than 250,000 lives.

    Ellipse’s Death In Service benefits include an online nomination of beneficiary form and online medical underwriting, which can help speed up the application process.

    • Free cover level: £1.25 million
    • Minimum lives: 2
    • Max. policy cease age: 75
    • Master trust: Available
    legal & general

    Legal & General

    Legal & General was founded in 1836 and is one of the oldest and most recognisable insurance brands in the UK. With Legal & General workers get access to a substantial employee assistance program that includes telephone counselling; cognitive behavioural therapy (CBT); telephone-based bereavement counselling; a legal information service; and medical information.

    • Free cover level: £5 million
    • Minimum lives: 10
    • Max. policy cease age: 75
    • Master trust: Available
    Metlife

    MetLife

    MetLife is the trading name of New York-based business The Metropolitan Life Insurance Company. It’s among the largest providers of insurance, annuities and employee benefits programs worldwide.

    MetLife’s group life cover comes with a free bereavement and probate support for employees and their families, making up to six face-to-face bereavement counselling sessions available.

    • Free cover level: Determined by underwriting
    • Minimum lives: 2 members for policies with Flexible Benefits; 3 members for policies without Flexible Benefits
    • Max. policy cease age: 75
    • Master trust: Available
    unum

    Unum

    The Unum Group was formed in 1999 through the merger of Unum Corporation and The Provident Companies. Today, the company operates through three distinct business arms: Unum US, Colonial Life and it’s UK branch, Unum UK.

    Unum offers a multiple of between 1x and 12x salary with one of the highest free cover limits on the market.

    • Free cover level: £15 million
    • Minimum lives: 20
    • Max. policy cease age: 75
    • Master trust: Available

    Need Death in Service Quote and Expert Advice?

    We are here to ensure you and your employees don’t miss out on financial security because appropriate insurances were not put in place. If you are looking for a Death in Service Insurance Quote we can compare pricing from all the leading UK insurers.

    Our experts can help provide you with all the necessary information for you to make an informed decision. It will all be compiled into a free report laying out the most competitive options for your business.

    Why Speak to Us?

    We started Drewberry because we were tired of being treated like a number and not getting the service we all deserve when it comes to things as important as protecting our health and our finances. Below are just a few reasons why it makes sense to talk to us.

    • There is no fee for our service
    • We are independent and impartial
      Drewberry isn’t tied to any insurance company, so we can provide completely impartial advice to make sure you get the most appropriate policy based solely on your needs.
    • We’ve got bargaining power on our side
      This allows us to negotiate better premiums for you than you going direct yourself.
    • You’ll speak to a dedicated expert from start to finish
      You will speak to a named expert with a direct telephone and email. No more automated machines and no more being sent from pillar to post – you’ll have someone to speak to who knows you.
    • Benefit from our 5-star service
      We pride ourselves on providing a 5-star service, as can be seen from our 2502 and growing independent client reviews rating us at 4.92 / 5.
    • Benefit from the protection of regulated advice
      You are protected. Where we provide a regulated advice service we are responsible for the policy we set-up for you. Doing it yourself or going direct to an insurer won’t provide this protection, so you won’t benefit from these securities.
    • Claims support when you need it the most
      You have support should you need to make a claim. The most important thing when it comes to insurance is that claims are paid and quickly. We are here to support you during the claims process and make sure it’s as smooth and stress free as possible.
    • A personalised benefits page for your business
      We want to make it easy for your employees to access and use their benefits. Get a custom landing page containing your policy details, important documents and exclusive discounts 👍 – see example.
    Tom Conner Director at Drewberry

    If you would like some help reviewing your existing Death in Service or are setting up a new scheme please don’t hesitate to get in touch.

    Pop us a call on 02074425880 or email us at help@drewberry.co.uk.

    Tom Conner
    Director at Drewberry

    Sam was very helpful and kept me informed at all times. Brilliant service.

    Paul Williams
    05/06/2019
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