Are Death In Service Benefits Compulsory?

I’m in the process of setting up my own business. However, I haven’t yet hired 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 mandatory as well. Is that true?

Question asked by Grace Hersh

Is Death In Service Insurance Compulsory?

No, it’s not compulsory to offer employees Death In Service. You don’t have to if you don’t want to.

However, there are many reasons to consider providing it anyway.

Employee Benefits Can Help Recruit and Retain Talent

Employee Benefits can do wonders for attracting the right talent into your business and ensuring their stay is long-term.

In our Employee Benefits Survey, we found that:

  • 29% of workers wanted their employers to provide Life Insurance
  • However, only 13.7% of employers offered Death in Service cover
  • 55% of employees were stressed; money worries topped the list. Having Death in Service cover in place can reduce such worries by reassuring workers their loved ones will be able to cope financially should the worst happen.

Death in Service Isn’t Expensive

Death in Service is one of the cheapest employee benefits. Moreover, it 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 benefit in kind.

Meanwhile, the death benefit for the family is usually tax-free thanks to the trust structure the employer sets up alongside the policy.

Offer Employees Protection They May Not Be Able to Get Individually

With individual Life Insurance policies, the insurer asks applicants health questions to determine the cost of cover. As such, people who are older or perhaps have a shaky medical history might have to pay more. This might be something they can’t afford.

With a Death In Service policy, however, insurers underwrite the vast majority of employees on a group basis. Ultimately, this means there’s not usually any need to answer medical questions, so an employee might find it easier to get group cover than individual protection.

I’ve held a policy with Drewberry for several years now. They are always friendly, insightful and offer great service.

Dan Pettitt
13/01/2021 Logo
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