What does death in service mean?
Death in service cover is a benefit you can get when working for some employers. With this type of cover, a lump sum will be paid to your dependants if you die while employed by the company.
Who gets the death in service payment?
If the company you work for has a death in service benefit, you’ll usually be able to nominate the person(s) you would like to get the payment. This is typically done by filling out a paper or online nomination form from your employer. This can also be called an expression of wish. It’s a good idea to complete this and update it if your circumstances change. For example, if you get married or divorced.
How much is the death in service payment?
The one-off lump sum payment from a death in service scheme is typically between 2 and 4 times your annual salary. It can vary based on your employer’s policy. It’s important to check the policy so you know how much the payout will be.
Is the death in service benefit taxable?
This will depend on how the particular death in service scheme has been implemented. Any payment might form part of the deceased’s estate for Inheritance Tax purposes. This is also an area of the law where there is change from time to time. So the tax law at the point of death or payment would need to be considered.
Is death in service the same as life insurance?
Both death in service benefit and life insurance can help towards the financial support of your loved ones after you die, but there are a few differences.
Death in service schemes are an employee benefit. If you die when you’re employed by the company, your nominees will be paid a lump sum amount. You don’t have to pay for this benefit.
Life insurance is a type of cover you have to take out yourself. You’ll be able to choose how much cover you want, but you’ll have to pay a premium for the term of the life policy. A lump sum will be paid out to your loved ones if you die within the policy term.
In the event of death, how long does it take for the money to be paid out?
The timeframe for being paid a death in service benefit could take a month or even longer. This can depend on a few things, including:
- the terms of the policy
- how long it takes to get a death certificate
- how long it takes for your employer or trustee to gather information on who the potential beneficiaries are (an expression of wish form can help with this).
How do death in service payments work?
Telling the trust
If you die, your employer or loved ones will need to let the trust know.
Documents
The trust will need to see a death certificate before they can complete the claim. Depending on the company, they might also need to see other documents.
Approval
When the trust has checked all the documents, and decided who should receive the benefit, they’ll arrange for the money to be paid out.
Payment
The money is paid to the beneficiaries.