Death in Service vs Life Insurance: What's the Difference?

If you have death in service benefits at work, you might think you're covered. Many people assume their workplace benefit is enough and skip buying personal life insurance.

This is a risky assumption. Here's why death in service alone isn't sufficient, and how to work out what additional cover you actually need.

What is Death in Service?
How Death in Service Differs from Life Insurance
The Maths: Why Death in Service Isn't Enough
The Hidden Risks of Relying on Death in Service
How to Calculate Your Gap
FAQ
Next Steps

What is Death in Service? {#what-is-death-in-service}

Death in service (also called death in service benefit or employer life insurance) is a benefit some employers offer as part of their benefits package. If you die while employed by that company, they pay a lump sum to your beneficiaries.

How It Typically Works

Multiple of salary: Usually expressed as 2x, 3x, or 4x your annual salary
No medical required: Most schemes don't require health questionnaires
Free or subsidised: Usually paid for by your employer
Paid through scheme trustees: Often a discretionary benefit, meaning trustees decide who receives it

Common Death in Service Multiples

Employer Type	Typical Multiple
Basic schemes	2x salary
Standard corporate	3x salary
Generous corporate	4x salary
Senior roles	4-6x salary
Public sector	Varies widely

Example: If you earn £50,000 and have 4x death in service, your beneficiaries would receive £200,000 if you died while employed there.

How Death in Service Differs from Life Insurance {#how-death-in-service-differs}

The Critical Differences

1. Portability Personal life insurance follows you for its full term regardless of what happens with your job. Death in service vanishes the moment you leave your employer.

2. Control With death in service, trustees (often your employer's pension administrators) have discretion over who receives the money. While they usually follow your Expression of Wish form, they're not legally bound to. With personal insurance, you absolutely decide who gets the payout.

3. Amount Death in service is capped at a multiple of your salary. Personal insurance lets you choose the exact amount you need based on your actual circumstances.

The Maths: Why Death in Service Isn't Enough {#the-maths}

Let's do a real calculation for a typical UK family:

The Scenario

Annual salary: £50,000
Death in service: 4x salary (£200,000)
Outstanding mortgage: £280,000
Two children, ages 3 and 5
Partner works part-time: £15,000/year

What the Family Actually Needs

Need	Amount
Mortgage payoff	£280,000
Income replacement (15 years at £35,000 gap)	£525,000
Childcare costs (5 years)	£60,000
Education buffer	£40,000
Emergency fund	£30,000
Total need	£935,000

The Gap

Total need: £935,000
Death in service: £200,000
Protection gap: £735,000

That £200,000 death in service benefit doesn't even cover the mortgage. The family would need to sell the house just to clear the debt, with nothing left for living expenses.

What It Would Cost to Fill the Gap

For a healthy 35-year-old non-smoker, £750,000 of 20-year level term life insurance costs approximately £28-38 per month.

That's less than most families spend on takeaways or streaming services.

The Hidden Risks of Relying on Death in Service {#hidden-risks}

Risk 1: You Lose Your Job

Made redundant? Resign? Fired? Your death in service cover ends immediately. If you've developed health conditions since starting the job, getting new cover could be expensive or even impossible.

Risk 2: Your Employer Changes the Scheme

Companies can:

Reduce the multiple (4x to 2x)
Add restrictions or exclusions
Remove the benefit entirely
Change to a different scheme with worse terms

They usually just need to give you notice. You have no say.

Risk 3: Maximum Caps

Many schemes have caps. For example:

"4x salary up to a maximum of £500,000"
"Cover capped at earnings of £150,000"

High earners may have much less cover than they think.

Risk 4: Gaps in Employment

Taking a career break? Going freelance? Starting a business? Your death in service stops. Personal life insurance continues regardless.

Risk 5: Nomination Doesn't Guarantee

Death in service is typically held in a discretionary trust. You complete an "Expression of Wish" form naming who you want to receive the money, but the trustees can technically override this. In practice they usually don't, but if your situation is complex (estranged family, ex-partners, etc.), this could create problems.

Risk 6: Probate and Timing

While death in service is usually paid relatively quickly, there can be delays if:

Trustees need to investigate circumstances
Your Expression of Wish is outdated
There are disputes about beneficiaries

Personal life insurance in trust typically pays out faster.

How to Calculate Your Gap {#how-to-calculate-your-gap}

Step 1: Calculate Your Total Need

Use our life insurance calculator or this formula:

Total Need = (Salary x 10-15) + Mortgage + Childcare Costs + Other Debts + Buffer

Step 2: Find Your Death in Service Amount

Check your:

Employment contract
Benefits portal or HR system
Most recent benefits statement
Pension scheme documentation

Make sure you know:

The exact multiple
Any caps that apply
Whether it's discretionary

Step 3: Calculate the Gap

Gap = Total Need - Death in Service Amount

Step 4: Buy Personal Cover for the Gap

Get quotes for the gap amount. Consider:

Level term: Fixed payout throughout the term
Decreasing term: For mortgage portion (cheaper)
Family income benefit: Monthly payments instead of lump sum

Frequently Asked Questions {#frequently-asked-questions}

Key Takeaways

Death in service is a bonus, not a solution - Treat it as part of your cover, not all of it
4x salary sounds good but usually isn't enough - Do the maths for your actual situation
The biggest risk is job loss - Your cover disappears when you leave
Personal life insurance gives you control - You decide the amount, term, and beneficiaries
The gap is usually affordable to fill - £30-40/month for most families

Next Steps {#next-steps}

Last updated: January 2026. This guide is for informational purposes only and does not constitute financial advice. Check your specific death in service scheme details with your employer.

Death in Service vs Life Insurance: What's the Difference? (2026)