Death in Service Cover for Employees

Death in Service (DIS) is a core protection benefit that provides financial security for employees and their families. With Fulcrum, it’s quick and simple to arrange, and we can secure high levels of guaranteed group cover.

Typically structured as a group life insurance policy, it provides a tax-free lump sum (usually a multiple of your employee’s salary), forming a valuable part of a wider employee benefit strategy.

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Understanding Death in Service Structure and Tax Treatment

Most group schemes insure a multiple of your employee’s annual salary, delivering a lump sum to beneficiaries in the event of their death.

These arrangements are written under a discretionary trust, meaning the life insurance payout can usually be paid as a tax-free lump sum, outside of the employee’s estate for inheritance tax purposes.

Given the lump-sum benefit involved – often around 4x salary – it’s important to understand the differences between HMRC Registered and Excepted policies. While we don’t provide tax advice, these are explained clearly when working with Fulcrum.

In simple terms:

Lump-sum death benefits paid from HMRC-registered policies count towards an employee’s Lifetime Allowance (the threshold above which the employee’s beneficiary pays personal income tax on the money they receive)

The current £1,073,100 threshold covers a deceased employee’s pension fund assets and lump-sum DIS benefits paid from HMRC-registered group insurance policies.

Older employees with larger pension pots, accumulated over longer careers, are more likely to breach the Lifetime Allowance tax threshold (especially if their lump-sum DIS benefit is included in the assessment).

But in some cases, DIS benefits can be removed from these assessments by insuring them under an Excepted group life policy. There are pros and cons to consider with Excepted policies, which we can walk you through. The key point is that if you don’t know about them, you need to understand the difference, and we can help you with this.

Member Categories and Data Management

Managing member categories and employee data can be a challenge in DIS schemes. It’s critical that your insurance matches the benefit promises you’ve made, so we provide:

Helpful templates for accurate data collection

Continuity of service to keep your scheme aligned

Guidance to ensure administration is correct

When a claim needs to be made, we understand how distressing this can be for your HR team and the employee’s family. We’re here to help every step of the way, with pre-populated claim forms and guidance on the process and timescales.

Death in Service vs Individual Life Insurance

Belonging to an employer-funded DIS group scheme does not prevent employees from purchasing or continuing personal life insurance.

However, there are strong advantages when your business takes care of this for employees:

Personal cover becomes one less thing that employees need to think about and pay for.

Unlike personal cover, group cover provides guaranteed acceptance, because there’s no application process requiring employees to disclose personal health information. There are limits to how much guaranteed cover is available (based on the size of your group scheme), and your insurer will still ask you to confirm if you personally know of any high risks like cancer or terminal illness, but this is a ‘to the best of your knowledge’ question, so you’re not required to canvas your employees.

Group protection can mean the difference between a complete personal policy exclusion versus a significant level of guaranteed group cover. Group policies also include a range of free services, e.g. probate and bereavement helplines, employee assistance programmes, and other health, wellbeing and retail savings.

Enhanced Reach, Global and Advanced Options

For UK-headquartered businesses with international staff, DIS schemes can be designed to operate effectively across multiple countries.

A multinational contract can improve the local acceptance terms available to your smaller international populations, enhance head office oversight, and create profit-sharing opportunities.

Designing Sustainable Death in Service Schemes

An effective death in service insurance arrangement provides a reassuring safety net in the background, while also delivering essential financial support to employees’ families when it matters most.

Considerations include appropriate multiples of an employee’s annual salary, integration with wider employee benefit provision, and selecting the right insurance company based on their admin and support capabilities.

Ongoing governance is also key. As your business evolves, we’ll help you to remain abreast of compliance and tax regulations, and we’ll regularly re-test the cost of your insurance to ensure it remains competitive.

Well-structured service benefit schemes not only provide financial protection but also strengthen your overall workplace benefits offering, supporting recruitment, retention, and employee confidence.

Let’s talk about your Death in Service Cover

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What Our Clients Say

Partnerships built on trust, results, and understanding - here's what our clients have to say.

“By identifying and recognising our specific requirements and priorities, Fulcrum has helped us to tailor our company benefits around a relatively strong local National Health Service. This has resulted in significantly reduced insurance costs without reducing the speed or quality of care. We have always found their honest and pragmatic approach to be a good fit with our own business.”

“With our previous provider, I always felt like ‘just a number’ calling them with any queries – whereas an expert outfit like Fulcrum offers personalised service. After meeting them, we discovered there is much to insurance plan design which can impact massively on premiums”.

“Your team are a credit to Fulcrum. Michelle has been excellent with progress and updates to the schemes we’ve implemented.”

“Fulcrum has helped us to protect more employees, through better plan design.”

“Fulcrum thinks in a much more creative and strategic way than the average broker, and as a result provides a much higher value of service. We have saved approximately £50k in direct costs and far more in management time, as administration is far simpler.”

“Good engineers are thin on the ground and it’s important to us to attract and retain some of the best in the industry. Feedback tells us our employees value the benefits aspect of their package, and we are keen go the extra mile with this. We have found Fulcrum’s service to be second to none, extremely knowledgeable and professional.”

“Our experience with the team at Fulcrum has been nothing short of fantastic. They are friendly, approachable and very quick to respond to any queries. They spend time to explain situations and processes, to ensure that we understand them fully which demonstrates their dedication to great customer service”.

“Fulcrum’s advice and hands on approach has enabled us to provide a competitive and comprehensive Benefits package for our Employees.”

“I was initially sceptical that Fulcrum would be able to help us with our staff benefits packages as I felt we already had good value from providers. However, their careful and methodical analysis, combined with some innovative thinking, ended up with a great result with considerable savings for us. What’s more, the savings kicked in immediately. We continue to be delighted with their service.”

“Through diligent assessment of the market and tough negotiations on our behalf Fulcrum has saved us many thousands of pounds on our staff benefits. As well as major cost savings, the team at Fulcrum are exceptional in their professionalism and customer service”.