In the UK, Group Life Insurance via Work is one of the most common ways families get protection — and it’s often included as part of employee benefits.
How It Works
- Officially called “Death in Service Benefit.”
- If an employee dies while on the company’s payroll (doesn’t matter if at work or not), their family/beneficiaries get a tax-free lump sum.
- The payout is usually a multiple of the employee’s annual salary — most often 2x, 3x, or 4x salary.
Example
- Annual salary: £40,000
- Employer scheme: 3× salary
- If the employee dies → family receives £120,000.
Key Features
- Free or Low-Cost: Employees don’t usually pay for it (company funds it).
- Covers All Causes of Death: Not just accidents, but illness too.
- Not a Pension: It’s separate from pensions, though some employers also offer pension death benefits.
- Trust Structure:
- Usually paid into a discretionary trust set up by the employer.
- This keeps it outside the estate, so it’s free from inheritance tax and reaches the family quickly.
Limitations
- Ends when you leave the job (not portable).
- May not be enough alone to cover long-term family needs (mortgage, kids’ education, etc.), so families often add private life insurance.
- Doesn’t always cover partners/spouses unless specifically included in the scheme.
Summary:
Group life insurance via work in the UK = free, employer-provided, pays a multiple of salary if an employee dies, but it stops when you change jobs and might not be enough by itself.
Would you like me to also show you a comparison between Death in Service vs. Private Life Insurance so you can see why families often combine both?