Death in service benefit. It’s one of those perks that sits quietly in your employment contract, rarely thought about, occasionally mentioned in the onboarding pack you skimmed on your first day.
Most people with death in service cover know roughly how it works — if you die while employed, your employer pays a multiple of your salary to your family. Three times. Sometimes four. Occasionally more.
And there’s a natural tendency to think: that’s sorted, then. But is it?
Let's do the maths
Say you earn £45,000 a year and your employer offers three times salary death in service. That’s £135,000 paid to your family.
Now say your mortgage has £220,000 outstanding. That’s already more than the death in service payout. After clearing the mortgage, there’s nothing left — no income replacement, no childcare fund, no buffer for the next ten or twenty years.
If you earn more, the multiples often stay the same, and the gap between the payout and what your family actually needs grows wider.
"Death in service cover disappears the day you leave the job. Personal cover stays with you forever."
You lose it when you leave
Death in service cover exists only while you’re employed by that company. The moment you leave — whether you resign, are made redundant, take a career break, or retire early — the cover disappears.
That’s fine if you go straight into another job with equivalent cover. But there’s usually a gap. And if your health has changed in the intervening years, getting comparable personal cover might be more expensive or come with exclusions.
Personal life insurance, by contrast, is yours. It travels with you regardless of where you work or whether you work at all.
It doesn't cover critical illness
Death in service pays out when you die. It doesn’t pay out if you’re diagnosed with cancer, have a heart attack, or suffer a stroke and survive. It doesn’t cover the period when you’re alive but unable to work.
For most families, that’s actually the more likely — and in some ways more financially complicated — scenario. You need an income while you recover. Bills don’t stop because you’ve had a serious diagnosis.
It might not be as tax-efficient as it looks
Death in service payments can form part of your estate, potentially triggering an inheritance tax liability depending on how the scheme is set up. This varies by employer and scheme structure, but it’s worth checking.
A personal life insurance policy written in trust, by contrast, sits outside your estate entirely. The payout goes directly to your named beneficiaries, bypasses probate, and is typically free of inheritance tax.
What should you do?
Death in service is a valuable benefit — don’t underestimate it. But treat it as a base, not a complete solution.
Calculate the gap between what your employer provides and what your family would actually need. A rough rule of thumb is ten times your annual income, plus outstanding mortgage balance. Subtract your death in service cover. The remainder is what you need to fill with personal life insurance.
And then, separately, think about what happens if you’re seriously ill and can’t work. Death in service doesn’t cover that. Income protection and critical illness cover do.
