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
Compare Top 10 UK
 Protection
Insurers
 
Takes approx. 60 seconds
Type of Policy
Level of Cover
Date of Birth
Loading your options...
Thank you for using our Quote Tool
If you need some help, just call us!
T: 02084327333
Our in-house Experts are here to provide FREE impartial advice!
Our Experts can answer all your questions
Our Experts can send you more appropriate options based on your personal circumstances

Very important if you are either Self-Employed or a Company Director.

Our online quote tool is good but our Experts are better

Oue Experts have access to far more insurers and can often find a better deal offline.

Saves you time, let our Experts do what they are best at

Answered by Alicia Hempsted

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 paying 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. This avoids 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.

Egle Blusiute, Independent Protection Expert 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.

Egle Blusiute
Independent Protection Expert at Drewberry

Life Insurance
 
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.
Compare Top 10 UK Insurers
  Takes approx. 60 seconds
 - 
Need help? 
Call us on 

Frequently Asked Life Insurance Questions

 
I’ve just left my job to go freelance and need to replace the old Life Insurance policy I had...
 
Having had our first child we are looking at are life insurance options, Are we able to take out a joint...
 
I’m in the market for life insurance, after doing some research I would like to get some more advice....
 
We have just had our first child and need to get some Life Insurance, i cycle to work and was wondering...
Need Help? Live chat now and get an instant answer from our Experts...

Neil
Pensions

Victoria
Insurance
Our Latest Reviews
Jayant Rampuria
06/10/2018

Oliver did an excellent job in making the right recommendations. He's been very patient in dealing with my request and helping me choose the right product. Well done and thanks very much!

James Mclauchlan
05/10/2018

Josh did a great job. Did all the legwork for me in getting the best quote and even handed it over to someone else whilst he was away, then finished the whole thing once he was back – impressed!

Raviteja Sajja
02/10/2018

Josh was very good at communicating about different options for Life insurance, advising us on right choice and benefits. I would strongly recommend Drewberry. Thank you Josh.

We are rated 4.9/5 based on 1742 independent client reviews.
To read more of our independent client reviews click here →
REVIEWS
EXCELLENT
4.92 / 5 Average
1831 Reviews
A Lovell
Overall Rating
Extremely helpful and able to understand the various issues and constraint
D at Inforcehub
Overall Rating
Very knowledgeable and easy to deal with.
A Kanwal
Overall Rating
Bronja Whitlock was absolutely brilliant, as my mind isn’t in the right place at the moment due to the loss of my partner and I forgot who my insurers were or if I was covered. I therefore contacted her from an old email that I had from a few years just explaining my situation. I wasn’t expecting a response to be honest, but Bronja replied back the same day. She didn’t just reply with the most empathising response, but she also contacted the insurance company and told them of my situation and ordered my claim pack on my behalf, which I can’t appreciate enough. Bronja Whitlock you are an asset to your company. Thank you.
R Sajja
Overall Rating
Josh was very good at communicating about different options for Life insurance, advising us on right choice and benefits. I would strongly recommend Drewberry. Thank you Josh.
S G
Overall Rating
Rauri has been very professional and has responded promptly to any queries. Very friendly nature too