Your employer may provide some degree of “death-in-service” life insurance as part of your benefits package. Death-in-service cover is usually an amount of life insurance equal to a multiple of your annual salary which will be paid to your estate—tax free—if you die while employed by the company. For example, if you earn £30,000 a year and your death-in-service benefit is three times your salary, you have £90,000 of life insurance cover.
In the example above, £90,000 might seem like a tidy sum. However, you should ask yourself whether that is enough to secure your loved ones’ financial future if you should die unexpectedly.
The amount of cover you need will be different for every person. You should consider your individual circumstances. For instance, you might have a mortgage and or other outstanding debts that will need to continue to be paid down. You should also ask yourself how much money your partner may need to maintain their standard of living, including bringing up any children. Also consider if it would be more beneficial to provide your family with a lump sum they can manage, a fixed annual income, or perhaps both.
If you find that your death-in-service benefit doesn’t provide the level of financial security you’ve determined that your family would need if you were to pass away, you may want to think of buying extra cover.
If you leave your current company, you should be aware that your death-in-service benefit will not follow you to your new position. If you’re in good health that may not be a major concern, and you can arrange your own cover at that point. However, if you develop a serious medical condition that causes you to leave work or change your job, you may find it difficult to find your own life cover by then or it may be prohibitively expensive. (There are other life insurance products such as critical illness or income protection cover that may pay out a lump sum or an income if you become seriously ill.)
Death-in-service benefit can be a valuable addition to your employee benefits, however you should look at your own situation and ask yourself whether it will sufficiently provide for your family.