Many employers offer their employees an additional benefit called Death in Service benefit. As the title suggests it is a cash benefit paid to the spouse, family or estate of the employee should they die while still working for the company. Typically the payment equates to a multiple of annual salary, normally between 2 and 4 times annual salary. Even for people on modest incomes this could result in a payment of over £100,000.
While this should be looked upon as a welcome additional benefit, it is a fundamental mistake of the employee to consider it as an alternative to holding their own life insurance. As Cathy Luzmore of Declined Life Insurance explains “People need to remember that the cover is entirely linked to their employment and their employer. While people may feel confident today that their employment is safe, we have seen too many times that things can change, and there are numerous reasons why somebody may not be working for the same company in even a years time.
“Somebody doesn’t have to have done something wrong to lose their job, simple things like, enforced redundancies, take-overs and mergers can all happen and result in you losing your job. Your employer may even decide to relocate to save money, just take the current BBC move from London to Salford, there will undoubtedly be casualties from that move” Ultimately your employer could decide that continuing to offer the benefit is too expensive and stop the scheme..
A life insurance policy that you have bought is completely under your control. As long as you continue to pay the premiums you are covered. Irrespective of your employment situation you can be certain that your home and family is protected.
Bob Cook Principal IFA at Platinum Financial Consulting says, “It may sound harsh, but I truly believe that anybody who relies on a Death in Service benefit to protect a valuable asset like a mortgage or other liability is being extremely foolish and exposing their family to unnecessary risk. There are too many things that can go wrong. People may feel that if and when they leave their current employer, if their new employer doesn’t offer a death in service benefit they can buy cover then. Well maybe they can, but equally their health or lifestyle may determine that they are uninsurable and they simply can’t get insurance. If they were then to die, their family has not only lost a valuable income, they may also have to lose their home”. Bob says “Death in service benefit is a great additional perk, but do not protect the things you care about and love with it”.
Despite the comments above the website http://www.declined-life-insurance.co.uk/, helps many people replace the cover they got from their Death in Service Benefit from their employer. They can cover people from as little as 30 days, while they are between jobs , or for many years.