Author:Jonathan Harvey

Read:12 mins

The difference between death in service cover and life insurance

Death insurance is a form of employee benefit that functions very like life insurance : a cash sum is paid out to your relatives in the event of your death. However, unlike with life insurance , this payout is linked to your salary and is completely tax-free. Employee benefit is usually linked to a company’s pension scheme, so it is common that you have to be a member of this in order to qualify.

Death insurance cover typically only ensures you while you are still working at the company providing it, and not all employers offer this service benefit to their employees. If you want to find out if you can get it, you’ll need to contact your employer’s HR department.

Death insurance vs life insurance: what is the difference?

It works similarly to a life insurance policy, but there are a few differences that it’s good to be aware of before considering whether it offers you a satisfactory level of cover. A death insurance policy will typically feature the following:

  • A tax-free sum paid out upon death.
  • A payout calculated as a multiple of your salary (usually between 2 and 5 times the amount you earn in a year).
  • Dismemberment insurance has payouts regardless of where death occurs. You don’t need to die while physically at work to be covered.
  • Cover that ends when you leave your employer.

Life Insurance

Picture this: a financial safety net that ensures your family’s future is secure, even when you’re no longer around to look after them. That’s the peace of mind life insurance provides, serving as a fundamental pillar of financial planning for people all over the UK. But, with a sea of life insurance policy options, each with their unique benefits and drawbacks, how do you navigate to the one that best fits your needs?

Accidental Death Insurance

This affordable type of life insurance grants a lump sum benefit to your loved ones if an unfortunate accident claims your life. Plus, if an accident leaves you disabled, there’s a benefit payout for you too.

Now, let’s talk about term life insurance – a safety shield for a set period. You pay a fixed premium each month and if life throws a curveball and you pass away during this term, your beneficiaries receive a death benefit. It’s a fitting option for those with dependants needing financial cover for a specific time frame.

Permanent Life Insurance

Permanent life insurance is a lasting promise that your loved ones will be taken care of when you’re no longer around, no matter when that happens. Yes, it costs a bit more than term life insurance, but think about it as a piggy bank that also doubles as an emergency fund – ready to be accessed when life throws a curveball your way.

Can you take out life insurance in addition to death insurance?

Yes, and this can often be a good idea. Depending on your annual salary and the scheme offered by your employer, the tax-free payout from your death insurance cover may not be enough to leave your family in a secure financial situation if the worst were to happen. If this is the case, then you might want to consider taking out a life insurance policy on top of the death insurance benefit offered by your employer.

We’ve run through all the things you need to think about when considering whether to take out a life insurance policy in addition to your job’s cover.

What is Accidental Death Insurance?

A life insurance policy that steps in when life takes an unexpected, tragic turn. This is where Accidental Death Insurance comes into play. It responds with a lump-sum payout if the insured person succumbs to an accident.

Unique in design, this insurance is often more budget-friendly compared to traditional life insurance. Why? It specifically caters to accidental deaths, not natural causes or illnesses. So, you get peace of mind without the hefty price tag.

AD&D Insurance

Ever heard of AD&D Insurance? It’s short for Accidental Death & Dismemberment Insurance, and it’s a bit of a hidden gem in the life insurance world. Imagine a safety net that comes into play if an unfortunate accident results in death or the loss of a limb or body part. This type of policy doesn’t just stop there – it also provides financial protection in the event of a disability caused by an accident.

Death Benefit

Picture this – a world where your loved ones continue to thrive financially, even after your departure. This is the relief a death benefit brings. Think of it as a monetary safety net, ready to catch your nominated beneficiary once you pass on. They could receive a one-time payout or a series of financial injections, to utilise as they see fit. Whether it’s settling overdue bills, taking care of funeral expenses, or just securing their future, the choice is theirs. The cherry on top? This benefit comes standard when you purchase accidental death and dismemberment insurance.

Life Cover

Life cover is a life insurance policy that provides a payout to the beneficiary you choose when you are no longer around. It’s a financial security blanket, ensuring your beloved ones are taken care of even when you can’t be there to do it yourself.

Life Insurance

Life insurance essentially is a crucial financial shield. Specifically, accidental death cover steps in, offering a substantial lump sum if an unexpected tragedy strikes.

Life Assurance

Searching for the perfect life insurance provider is not a task to be taken lightly. It’s a quest, an adventure, and it’s worth venturing into the market to discover the deal that’s tailored just for you. With their expertise in insurance products, life assurance companies are your trusty guides, ready to navigate you towards the policy that best fits your needs.

But wait, there’s more! These companies can also dish out advice on additional cover like car insurance, acting as your shield against the unpredictable events of theft and accidental damage. Now, isn’t that a bonus?

Accidental Death Cover

Having peace of mind, knowing that your loved ones are financially secure should life take an unexpected turn. That’s the invaluable assurance Level Term Life Insurance offers you. It’s more than just a financial plan; it’s a safety net for your family’s future.

But here’s the catch – you need to be proactive. Regularly reviewing your policy is paramount. It ensures that the safety net stays relevant, adapting to your evolving needs. After all, life is a journey full of twists and turns, and your insurance should keep pace.

Term Insurance

Term insurance is one of the most basic forms of life insurance cover, providing a level amount of cover for a fixed period of time. This type of policy does not accumulate any cash value and does not pay out if you survive the term of the policy. It is ideal for those who want a simple insurance policy with no frills.

Universal Life Insurance

A life insurance policy that pays out to your chosen beneficiary when you’re no longer around, no matter the circumstances of your departure. Enter Universal life insurance – it’s not just your ordinary life insurance policy. This policy offers you a flexibility that’s quite extraordinary, allowing you to tweak your premium and benefits as you please over time.

But that’s not all. Universal life insurance comes with a unique perk – it can turn into a cash reservoir over time! This accumulated cash value can be used to cover your premiums or cater to other expenses. It’s not just a life insurance plan, it’s an investment for your future.

Inheritance Tax

Does the thought of inheritance tax keep you up at night? You’re not alone. Many UK families share this concern. But here’s a secret weapon – life insurance cover. It’s a clever way to counterbalance some of those pesky costs. Secure a policy, nominate a loved one or a charity as a beneficiary, and voila! The proceeds will be blissfully free from inheritance tax.

Critical Illness Cover

Picture this: a safety net waiting for you in the unpredictable game of life, ready to catch you if the unthinkable happens. That’s the promise of critical illness cover, a prized type of life insurance. Should life surprise you with a daunting challenge such as a cancer diagnosis or heart attack, this cover guarantees a lump sum payout. This financial lifeboat could be your saving grace, shouldering medical expenses or replacing lost income during a protracted illness.


Information about Life Insurance

Securing your family’s financial future, even when you’re no longer around. That’s the power of life insurance. It’s more than just a policy; it’s a safety net that catches your loved ones in the unfortunate event of a premature passing. This makes accidental death insurance coverage a must-have.

Ever thought about what would happen if life throws a curveball? Level term life insurance is a beacon in such stormy situations. It offers a lump-sum payout to your chosen beneficiary if you meet an untimely end. Insurance companies offer these policies, with coverage and premiums differing based on your risk factors. They evaluate your individual circumstances and adjust your premiums accordingly. A comforting thought, isn’t it?

The life policy typically covers accidental death caused by direct physical injury and illness. Depending on the policy, the coverage may also cover death caused by natural disasters, such as earthquakes, floods, and fires. The policy also often covers the costs of burial and funeral expenses.

Premium payments for life insurance are usually paid annually, although some policies may allow for monthly or quarterly payments. It is important to ensure the premiums are paid on time, otherwise the policy may lapse and the coverage will be cancelled.

Death insurance vs life insurance: when do you need both?

There are many reasons why you might want to take out a life insurance policy on top of your employement cover, and they’re more varied than just making sure your family are left with a large enough payout to be secure. There are certain purposes to which this cover cannot be put (such as linking it to a mortgage), and you need to take your long-term career plans into account. You might want to consider an additional life insurance policy if:

  • You have a mortgage that you want to cover through insurance. Policies from your job can’t be used for this reason, and so it’s best to look at decreasing term life insurance policies.
  • The level of cover in the your policy isn’t enough. Death insurance policies are linked to your salary, usually ranging from between 2 to 5 times the amount you earn in a year. If you want to be covered for more money in the event of your death, then you want to be thinking about a life insurance policy.
  • If you don’t plan on sticking with your employer in the long term. As the cover usually ends if you leave your current company, taking out life insurance is a good idea if you can see yourself moving jobs in the future.

In any of these cases, it definitely makes sense to consider additional life cover rather than just relying on your death insurance plan.

Death insurance vs life insurance: when is one enough?

Finding the perfect balance in your insurance coverage can be a tricky affair, often shaped by your individual circumstances. It’s completely plausible that your employer’s policy benefit could be providing you with adequate coverage already.

The real question is, does this type of policy truly meet your needs? If yes, fantastic! But if there’s a niggling doubt that you might need a little extra safety net, then it’s worth exploring our top 10 life insurance companies.

Buy ADD Insurance Securely

When it comes to life insurance in the UK, two regulatory bodies stand guard for your best interests – the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA). Their mission? To ensure you receive every protection and benefit that your life insurance policies promise.

Role of the Financial Conduct Authority

Imagine the Financial Conduct Authority (FCA) as your personal champion in the world of life insurance. Its crucial role is to ensure that the protection and benefits promised by life insurance policies do not remain just words on paper, but translate into real, tangible benefits for you.

Role of the Prudential Regulation Authority

The Prudential Regulation Authority (PRA) is your flashlight in the complex maze of life insurance. It ensures you’re well-informed about potential risks and equipped with enough information to make a wise decision. From helping you compare different policies to understanding the costs and terms, the PRA ensures that you’re never in the dark.

Death insurance vs life insurance: conclusions

Ever wondered if your employer offers Level Term Life Insurance as a benefit? It’s definitely worth a quick chat with your HR team to find out. Imagine the peace of mind knowing that, should the unthinkable happen, your loved ones will receive a tax-free cash sum. As long as you remain with the same employer, this coverage continues.

So, if you’re eligible, why not avail of this excellent benefit? The key considerations are whether it provides adequate coverage for your needs and if you plan on sticking with your current job long-term to maintain the insurance. If you’re unsure about either aspect, it might be worth exploring an additional life insurance policy, adding that extra layer of security.

Thinking about topping up your company’s death insurance benefit with a separate life insurance policy? Our in-depth reviews are here to guide you through all your options. We aim to help you find the perfect level of cover at the most affordable price.

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Jonathan Harvey is a distinguished expert with over twenty years' experience in the UK's life, health, and funeral insurance sectors. A Cambridge graduate and Fellow of the Chartered Insurance Institute, Jonathan has a proven track record in designing innovative insurance policies, and a strong reputation for making complex insurance matters comprehensible for the public. Known for his empathetic approach, he has helped thousands make informed decisions on their future security. Regularly contributing to leading publications and hosting educational workshops, Jonathan's commitment to client service and public education truly sets him apart in the insurance industry.

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