Cookie Use

Drewberry™ uses cookies to offer you the best experience online. By continuing to use our website you agree to the use of cookies. If you would like to know more about cookies and how to manage them please view our privacycookie policy.

Death in Service vs Life Insurance

I currently have a personal Life Insurance policy, but I just switched jobs and my new employer offers a Death in Service scheme. If I join the scheme, is it worth cancelling my personal policy to save a bit of money on my premiums? Is it better to have Death in Service or Life Insurance?

Question asked by Greg Reeve

While it might seem unnecessary to keep two different types of Life Cover, there are very valid reasons for why it may pay to keep your personal policy even if enrolled in your Company Life Insurance scheme.

What’s the Difference Between Death In Service and Life Insurance?

Personal Life Insurance

Individual Life Insurance is a simple product to cover your own life or, in the case of a Joint Life policy, the life of you and another person. It pays out a cash lump sum should the worst happen.

The amount you are covered for is set either to a figure of your choice or in relation to the cost of your mortgage. While the policy is in place, it is your responsibility to pay the premiums for your cover with your income after tax.

You will be covered by your policy up to an age of your choosing, providing you continue to pay your premiums. If during this time you are diagnosed with a terminal illness or pass away, your insurance provider will pay out the lump sum you are insured for.

If your policy is written into trust, the lump-sum from your Life Insurance will be paid into a trust which will then be distributed to your beneficiaries.

If your policy is not written into trust, however, the lump sum will be paid into your estate where it may be subject to inheritance tax.

Death In Service Insurance

A Death in Service policy, unlike a personal policy, is bought by a company to cover their employees.

It is an employee benefit, meaning the employer pays the premiums for the policy, which is for the benefit of the employee and their family.

Employees cannot choose how much they are insured for – the amount they are covered for is usually 2 to 4 times the employee’s annual salary.

The employee will be covered by this policy as long as they are working for the company that provides it. If they pass away or are diagnosed with a terminal illness during this time, the Death In Service payout is routed first into a trust owned and controlled by the company, avoiding inheritance tax on the benefit.

It is then the responsibility of the employer to distribute the lump sum to the employee’s beneficiaries.

Death In Service vs Individual Life Insurance

Death in service cover stops when you cease your employment…

One of the main difficulties of a Death In Service policy is that you will only receive cover as long as you are still employed by the company.

If at any point you are interested in a career change or if you retire, you will lose your Life Cover.

That’s why you need to have a personal policy to fall back on. If you have a mortgage or loved ones that rely on you financially having suitable personal life cover ensures that regardless of your state of employment you know they would be financial secure should you pass away.

Death in Service cover is not tailored to your specific circumstances and the amount that you are covered for is usually a lot less than you could cover yourself with a personal policy.

Three times the average salary in the UK is £85,800, but the average UK household debt is £84,412, which would leave very little left over to meet your family’s everyday expenses and your funeral costs should you pass away.

Don’t Write Off Death In Service, it is still a valuable benefit…

While a Death In Service policy may fall short in certain areas, it certainly shouldn’t be overlooked.

The payout from a company Life Insurance policy can give your family’s finances a much needed top up if you pass away. At the same time, many Death In Service policies offer additional benefits and services that can be very useful, like access to a virtual GP and a will writing service.

Nadeem Farid Head of Employee Benefits at Drewberry

While a Death In Service policy has its benefits, it can’t beat the reliability of a personal Life Insurance policy. A personal Life Insurance policy is guaranteed to protect your loved ones for as long as you need to and is easily affordable.

Nadeem Farid
Head of Employee Benefits at Drewberry

Michael Barrow was absolutely awesome, professional and truly helpful all the way setting up our insurance policy, made it super easy to select the right one. Highly recommend him for everyone. Thank you so much for your hard work Michael.

Istvan Szabo
24/04/2019
Compare Top 10 UK InsurersTakes approx. 60 seconds

Or call us on 0208 432 7333

Compare Top UK Insurer Quotes Logos
Contact Us
Head Office & Pensions and Investments
Millennium Bridge House
2 Lambeth Hill
London
EC4V 4GG
Personal Insurance & Accounts Payable
Telecom House
125-135 Preston Road
Brighton
BN1 6AF
Drewberry London Office MapDrewberry Brighton Office Map
Our Core Principles
  • 1You Come FirstWe are a client focused business who always aim to put you first.
  • 2We are ExpertsTo provide you with the best advice, we need to know our stuff!
  • 3We are HumanWe are real people with feelings who are here to help you.
  • 4We are ProfessionalProviding a 5-star service requires a professional approach to everything we do.
  • 5We are here to EducateWe don't believe in sales, we are here to educate so you can make informed decisions.