If you’re thinking about how to protect your loved ones financially, you may be asking: Is death in service the same as life insurance? While both offer a lump sum payout if you pass away, they work very differently. Understanding the distinction can help you make the right choice for your family’s future.
What is Death in Service Benefit?
Death in service cover is a workplace benefit. If you die while employed by the company, your employer may pay a tax free lump sum to your nominated beneficiaries. This is known as a death in service payment, and it’s often linked to your company pension scheme. It’s typically calculated as two to four times your annual salary, but the exact amount depends on your employer.
These payments are usually made via a discretionary trust, which helps avoid inheritance tax and speeds up the payment process.
Life insurance cover is a personal policy you take out yourself. It pays a life insurance payout to your chosen beneficiaries if you pass away during the policy term. You choose the amount, the length of cover, and who receives the money.
Unlike death in service, your cover isn’t tied to your job. It continues regardless of who you work for, offering long-term protection that stays with you.
What is Death in Service Benefit?
Death in service cover is an employee benefit provided by your employer. If you die while still employed, a tax-free lump sum is paid to your nominated beneficiaries. The payout is usually calculated as a multiple of your salary—typically 2x to 4x your annual earnings, though this varies between employers.
The benefit is often linked to your workplace pension and is usually paid via a discretionary trust, helping to avoid inheritance tax and ensuring quicker distribution to your loved ones.
What is Life Insurance?
Life insurance is a personal policy that you arrange yourself. It pays a lump sum to your chosen beneficiaries if you die during the term of the policy. You choose the amount of cover, how long it lasts, and who receives the money.
Unlike death in service, your life insurance policy is not tied to your employer. It stays with you regardless of where you work, offering long-term, portable protection that follows you through life’s changes.
Death in Service vs Life Insurance: Key Differences
| Who provides the benefit? | Death In Service | Life insurance |
|---|---|---|
|
Who provides the benefit? |
Your employer |
You, through an insurer |
|
Payout Amount |
Typically 1-4 times your salary |
Flexible, based on your needs & policy choice |
|
Medical Exam |
Usually not required |
May require, depending on policy |
|
Cost |
Low cost or free (employer paid) |
Premiums based on health, age and coverage level |
|
Does it follow you if you change jobs? |
No |
Yes – it’s yours to keep |
No, they are not the same. Death in service is a workplace benefit, limited to the time you’re employed by a particular company. Once you leave, retire, or switch employers, the cover ends.
Life insurance, by contrast, is a standalone policy you own. It gives you complete control over your cover—how much you need, how long it lasts, and who receives the payout. It’s designed to provide consistent protection, regardless of your job situation.
Can I Have Both?
Yes—and many people do. Death in service is a great benefit to have, but it may not be enough to fully protect your family, especially if your mortgage, debts, or childcare costs are significant.
Having your own life insurance policy alongside death in service cover provides comprehensive protection. It also ensures you won’t be left exposed if you change jobs or your employer removes the benefit.
When you leave a job, your death in service cover typically ends—unless your new employer offers a similar scheme. If they don’t, your family could be left without financial support.
That’s why many people choose to have their own life insurance policy in place. It gives you uninterrupted cover, no matter where you work.
Who Gets the Death in Service Payment?
When you enrol in a death in service scheme, you’ll usually nominate your beneficiaries. Payments are typically made through a discretionary trust, which means:
• The payout is usually exempt from inheritance tax
• It can be passed on quickly, without delays caused by probate
• Your nominated beneficiaries are taken into account by the trustees
What If I Already Have Life Insurance?
If you already have a life insurance policy, death in service can still be a valuable extra layer of cover. It may act as a financial buffer or temporary support while a personal policy is being processed or claimed.
Together, they offer a more resilient safety net for your loved ones.
Need Help Understanding Your Cover?
At Pineapple Insurance Services, we help individuals and businesses make sense of their protection. Whether you’re reviewing your employee benefits or arranging life cover for the first time, our expert advisors offer clear, personal guidance.
We’ll help you understand the options available and ensure you’ve got the right level of protection for today—and for the future
While death in service and life insurance may look similar on the surface, they serve very different purposes. One is employer-provided and temporary. The other is personal, portable, and flexible.
Want to explore your life insurance options or check whether your death in service benefit is sufficient? Contact Pineapple Insurance Services today for expert support and straightforward advice.
