In a society that values the welfare and wellbeing of employees, UK businesses often find themselves seeking benefits that go beyond the standard package. One such benefit is the "Death in Service" insurance cover.
Though it may sound ominous, this provision can be a crucial addition to an employment package, ensuring peace of mind for both the employer and employee. In this post, we'll delve deep into the intricacies of this cover, its benefits, and why it's becoming an essential facet of UK business practices.
What is Death In Service Insurance?
Death in Service insurance, at its core, is a type of employee benefit where if an employee dies while under contract, a tax-free lump sum (usually a multiple of the employee's salary) is paid out to their nominated beneficiaries. This is irrespective of whether the death occurs in the workplace or elsewhere.
Why Consider Death in Service Insurance?
1. Employee Wellbeing: Offering this insurance showcases a business's commitment to its employees' and their families' welfare. It demonstrates that the company cares for its staff even in the direst circumstances.
2. Attract and Retain Talent: A competitive benefits package, including death in service cover, can make a company more attractive to potential employees and help retain current ones..
3. Tax Efficiency: In most cases, Death in Service insurance is not treated as a 'benefit in kind'. This means that the employee doesn't have to pay tax on it, and businesses can often claim corporation tax relief on the premiums.
4. Mental Peace: The knowledge that one’s family will be financially supported, to some extent, in the event of a tragedy can be a significant mental relief for many employees.
How Does It Differ from Life Insurance?
While they might seem similar, Death in Service and life insurance are distinct:
• Duration: Death in Service is only valid as long as the individual remains an employee of the company providing the benefit. On the other hand, life insurance remains in effect as long as the premiums are paid, irrespective of employment status.
• Coverage: Life insurance policies might offer broader coverage options, including critical illness covers, whereas Death in Service typically provides a lump sum payment upon death.
• Cost: For the employee, Death in Service is usually free. The employer bears the cost. In contrast, life insurance policies are usually purchased independently and come at a personal cost to the policyholder.
Key Takeaways for UK Businesses
• Customisation: It's crucial for businesses to tailor their Death in Service insurance based on the company's demographics and needs. The policy could range from 2x to 4x (or even more) of the employee's annual salary.
• Consider Broader Wellbeing Strategies: While this cover is a notable benefit, companies should also explore other ways to support employee wellbeing, like mental health resources, flexible work schedules, and health check-ups.
• Review Regularly: The needs of employees and the business can change. Regular reviews ensure that the cover remains relevant and beneficial.
Death in Service insurance may initially seem like a sombre inclusion to a company's benefits package. However, its provision speaks volumes about a business's commitment to its employees and their families. For UK businesses aiming to bolster their reputation, attract talent, and ensure staff wellbeing, it's a benefit well worth considering.