Otherwise known as group life assurance, death-in-service is a payment made by an employer to the family of a deceased employee. It is usually paid as a tax-free lump sum and is generally calculated as a multiple of the employee’s annual salary but can also be a taxable pension, or both. The exact amount can vary between employers but a pay-out approximately four times a salary is typical.
Death-in-service is generally of a significantly lower cost than other group risk products. A further benefit to the employer is that premiums can generally be offset against corporation tax.
However, GRiD warns that the product name ‘death-in-service’ can be misunderstood and that employees may not fully understand that the product simply pays out if the individual is insured and is on the payroll – they do not need to die in the workplace itself to qualify for the benefit.
In 2021 the industry paid out 13,479 death claims at an average of £116,414 according to GRiD’s 2022 Claims Survey. These pay-outs would have been used by dependents to continue mortgage payments, pay for funerals, or cover any other financial commitments.
Speaking on death-in-service support, Katharine Moxham, GRiD spokesperson, notes that:
“During COVID, we saw many more people become aware of their own mortality and that of their close family, but as life returns to normal, it’s human nature to think these things won’t happen to us. However, this data is a stark warning that many families are indeed losing loved ones unexpectedly. This heartache can be hugely amplified, especially if the remaining family is not able to cope financially.
“[Death-in-service] is very much a peace-of-mind benefit. The employee will never see the funds but they can benefit by having the reassurance that should something happen to them, their family will not struggle for money in the short term.”