Group Life Insurance (Death in Service) Explained

What is group life insurance?

Group life insurance — commonly known as death in service — is a life insurance benefit provided by an employer to its employees. If an employee dies while employed by the company, a lump sum is paid to their nominated beneficiaries. The premium is paid entirely by the employer.

How does death in service work?

Most group life insurance schemes pay a multiple of the employee's annual salary — typically 2–4 times salary, though some employers offer more. The payout is made directly to nominated beneficiaries, usually free of income tax (though potentially subject to inheritance tax if not in trust).

Is group life insurance enough?

For most people, death in service is a valuable benefit — but not sufficient on its own. Key limitations include:

• Insufficient coverage: 2–4x salary is rarely enough to clear a mortgage and replace income for 20+ years
• Not portable: Cover ends when you leave the employer. If you change jobs or are made redundant, you lose the benefit
• Expression of wishes only: The insurer's trustees decide who receives the money — your nominated beneficiary is a guide, not a guarantee
• No control over sum assured: The employer decides the level of cover, not you

Personal life insurance vs group life insurance

Personal life insurance fills the gaps left by group cover. Unlike death in service, personal life insurance:

• Stays with you regardless of employment status
• Pays the exact amount you choose
• Goes to whoever you nominate (especially if in trust)
• Can be written in trust to bypass probate and inheritance tax

Relevant life insurance — a tax-efficient alternative

If you're a company director or business owner, relevant life insurance is a tax-efficient alternative to group life — paid for by the company, tax-deductible, and portable if you leave. It provides the same protection as personal life insurance but with significant tax advantages.