Death in service payment

On average, death in service is paid to your loved ones within 30 days but can be completed in as little as 2 weeks.

However, the length of time it takes for death in service to pay out will depend on the employer and individual situation.

The two major causes of delayed payment in the UK are missing paperwork and inquisition into death.

Keep reading to find out more about the death in service payment process…

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What is death in service benefit?

Death in service is a benefit offered by employers to protect the loved ones of its staff if the worst were to happen to them during their working life at the company.

The pay out sum tends to be a multiple of their salary and doesn’t require death in the working environment for a successful claim.

If the worst were to happen, a lump sum pay out will be made to the loved ones of the member of staff and acts as a form of life insurance.

As discussed, the amount tends to rely upon the salary of the staff member, and therefore, may require additional personal life insurance to ensure adequate financial protection for your loved ones.

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£137,934 is the estimated mortgage debt per household in the UK.

The purchase of a home is likely to be the largest financial commitment any of us will make in our lifetime. Your life insurance should cover your remaining mortgage balance to allow your loved ones to stay in the family home should anything happen to you.

Source: Moneynerd.co.uk
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The average monthly household budget in the UK is £2,548 (that’s £30,576 per year), which is spent on transport, food & drink, utilities (gas, electricity, water etc), clothing, council tax and leisure activities.

With energy prices hitting a record high and the cost of living rising sharply in the UK, you may wish to factor in utility bills and family living expenses into your cover.

Source: Nimblefins.co.uk
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The average personal debt of UK adults has risen to £34,566 (not including mortgage debt), with credit cards, personal loans and overdrafts being the most common forms of debt.

Factoring in any debts into your life insurance cover means that, if they need to be paid back from your estate after your passing, your loved ones won’t miss out financially.

Source: Money.co.uk
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According to SunLife, the average cost of a funeral in the UK is £3,953 (with the overall cost of dying at £9,200).

Funeral costs have increased by 116% since 2004 and are a significant cost which should be factored into the amount of life insurance you secure.

Source: SunLife.co.uk
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When factoring in cover for your children, you may wish to calculate the amount based on how long it is until they reach financial independence.

This could include childcare (£7,000 per year for part-time care), school expenses (£1,519 per school year for uniforms, lunches, stationary etc), as well as an additional sum for further education (this could be a contribution of up to £5,000 per year).

Sources: Daynurseries.co.uk, Primarytimes.co.uk & Savethestudent.org
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2 in 5 adults say they are relying on an inheritance to fund their retirement.

Factoring in an inheritance to your sum assured could allow loved ones to live a more financially comfortable life. Alternatively, you could leave a cash gift to a charity of your choosing.

Source: Moneyage.co.uk
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If you’re lucky enough to have your own savings or are part of the 30% of UK residents who already have a life insurance policy in place, this can provide financial protection for loved ones.

By entering your current cover, savings or death in service amount you can reduce the sum assured you require.

Source: Scottishbusinessnews.net
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Does everyone get death in service?

Whilst a commonly offered employee benefit in the UK, death in service is not compulsory and is not necessarily offered by all employers.

If provided, this will usually be detailed when you start the role and will be written into your contract.

Therefore, to determine whether or not you receive death in service, you should ask your employer or review your contract. This will also help determine the level of cover you receive.

Why death in service payment may be delayed

As discussed, a death in service payment can be made in as little as 2 weeks – But there are some instances where a claim may be delayed.

The most common of these reasons being missing paperwork and inquisition into death.

When joining a company providing death in service benefit, you'll be required to complete paperwork to detail who you wish to receive the pay out if the worst were to happen to you. This is known as a beneficiary.

If upon your death, this paperwork can't be uncovered, then a payment will be delayed whilst it's determined who the pay out should be made to – Most commonly your next of kin.

Secondly, a death in service pay out may be delayed if there's an inquisition into the death.

While the cause of death tends to be determined fairly easily postmortem, in certain instances further investigation may be required if the death was unexpected or looks suspicious.

In this instance, it's likely a death in service pay out will be delayed until the inquisition is complete.

Who gets death in service payment?

As mentioned, when joining a company offering death in service, you'll be required to complete paperwork to detail who you wish the payment to go to.

As long as this paperwork can be recovered (which is usually kept by HR), the pay out will be received by those you have detailed.

If no paperwork can be discovered, then it's likely the pay out will be passed to your next of kin.

Is death in service part of your estate?

For the most part, death in service benefits don't form part of your estate, meaning they're not subject to inheritance tax and your loved ones will receive 100% of the pay out.

The exception to this is when the benefit is paid to the estate as of right and your cover isn't written into trust through the relevant pensions scheme.

Is death in service part of your pension?

Whilst paid out in a lump sum as opposed to monthly, occasionally a company’s death in service benefit will be tied to a pension scheme.

Therefore, only employees who have opted into the relevant pension scheme will be eligible.

To determine whether or not you'll be eligible for death in service, you should consult with the relevant department at your company - most commonly HR.

Do I need life insurance?

Death in service is offered by many employers across the UK, but the pay out amount varies depending on your salary amount at the time of passing.

Whilst it's a great benefit, the pay out sum may not be sufficient to offer the future financial protection your loved ones need.

Furthermore, if you retire or change employers, your death in service benefit won't come with you. This could require you to obtain adequate personal life insurance at an older age when premiums will be more expensive, and you may have suffered health implications.

As a result, it's likely to be beneficial to have personal life insurance protection alongside any death in service benefit you're eligible for.

This won't only increase the amount your loved ones would receive but also ensure that you're still protected if you change jobs.

At Reassured, we can arrange life insurance cover from as little as 20p-a-day † .

Simply get in touch with our award-winning team today for your no-obligation, free quotes.

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