Are Death In Service Benefits Compulsory?

I’m in the process of setting up my own business, but have yet to hire any employees. While I know that a pension scheme is compulsory if I hire employees, I’ve been told that a Death in Service benefit is compulsory as well. Is that true?

Question asked by Grace Hersh
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Answered by Alicia Hempsted


Is Death In Service Insurance Compulsory for Employees?

It’s not compulsory to provide Death In Service for your employees if you own your own business. However, there are a lot of reasons for you to consider providing it anyway providing you meet the minimum number of workers – typically three – to make the scheme viable.

An impressive benefit to attract and retain talent

Employee benefits can do wonders when it comes to attracting the right kind of talent for your business and ensuring their stay is long-term.

With so much workplace stress caused by money worries, offering some financial security to employees and their families should the worst happen is a great starter benefit that can help put your business on the map.

Death in Service is inexpensive

In terms of available policies to offer your employees, a Death In Service benefit is one of the cheapest and comes with tax concessions for both employers and employees. Employers aren’t usually required to pay corporation tax on the premiums, while for employees it’s not typically considered a taxable P11D or benefit in kind.

Meanwhile, given that the policy’s payout goes to the employee’s family via a trust owned and controlled by the company, the lump sum benefit also sidesteps inheritance tax.

Offers protection that employees might not be able to get independently

Individual Life Insurance policies are always underwritten, with applicants being asked health questions to determine the cost of their cover. This means that people who are a bit older or perhaps have a shaky medical history might have to pay more for individual cover. This might be something they can’t afford.

With a Death In Service policy, however, the vast majority of employees will be underwritten on a group basis rather than individually, so there’s not usually any need to answer complicated medical questions. This is because Death In Service is based on a generalisation spread across the covered group of employees.

Emma Wilson, Employee Benefits Consultant at Drewberry

There is a whole range of Employee Benefits that you can offer your employees that each come with their own advantages. There are also insurance products that you can purchase for yourself using your business that may offer some tax advantages and save you money on premiums. Consider reading our Directors Insurance guide to learn more about your options.

Emma Wilson
Employee Benefits Consultant at Drewberry

Death in Service
Group Life Insurance
Employee Benefits
This information does not constitute financial or other professional advice. You should consult your professional adviser or contact us directly on 02084327333 should you require financial advice. It is important to ensure any insurance policy you take out is suitable for your needs.
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