Death in service: how much life insurance does your job pay?


Depending on where you work, your death in service life insurance could range from zero to 14 years' salary!

As well as salaries, bonuses, pensions and other financial benefits, many British employers offer their workers what is known as 'death in service' cover.

This life insurance pays out a lump sum to your beneficiaries if you die while working for a particular employer. In most cases, this work-based life cover pays out three to four times your salary on death, but this benefit varies significantly, depending on where you work.

Big payouts for bankers
In fact, the level of life insurance on offer at work can vary from nothing to as much as 14 times your yearly salary, according to a new survey by corporate-benefits adviser Punter Southall Health & Protection Consulting (PSHPC).

In research conducted for HR Magazine, PSHPC surveyed more than 400 of its corporate clients that together employ over 110,000 employees. PSHPC found a very broad variation in the level and value of life insurance offered by businesses in different sectors.

The financial services industry topped PSHPC's table, providing life cover of an average of 4.63 times yearly salary. For a mid-level manager on, say, £50,000 a year, this works out at a lump sum of £231,500 on death -- more than a quarter of a million pounds, entirely tax-free.

Within the financial sector, one in sixteen schemes (6%) provides life cover of seven or more times salary. For top managers and directors earning, say, £200,000 a year, such schemes could produce a tax-free lump sum of £1.4 million or more following a single death in service.

Remarkably, PSHPC's survey unearthed one financial firm whose scheme includes life cover of 14 times salary. For someone earning, say, £50,000, this would produce a bumper payout of £700,000, which is amazingly generous.

Low or no cover
Of course, not all employers offer this valuable protection to their workers. PSHPC found that sectors and industries without a strong history of unionised labour offered their workers the lowest levels of life insurance. For instance, a retail employee earning £15,000 working on a shop floor can expect to get only three times salary (£45,000) on death.

Here are the average levels of life cover by sector, from the highest to the lowest:



of salary

Financial services


Information technology


Highly skilled manufacturing


Sales and distribution






In addition, PSHPC found only one in 20 employers (5%) offers death-in-service cover of eight times salary, with almost all of these schemes found in the financial services sector.

Clearly, what this survey shows is that people working in highly paid sectors, such as banking and IT, also receive the most generous financial benefits on top of their high wages.

How much is your life worth?
If you have a spouse, partner or dependent children, then these loved ones would likely suffer financially if you die before retirement. That's why life insurance is so important, both for husbands and wives (non-working or otherwise).

To keep your dependants in the manner to which they are accustomed, many financial advisers will argue that you need life cover of around 20 times your yearly wage. However, the premiums for such copper-bottomed cover would be very high -- and, statistically speaking, you are unlikely to make a claim.

I reckon that life cover of around 10 times your salary should suffice. While this won't produce a Lotto-sized jackpot payout, it should enable your family to continue living in reasonable comfort. What's more, the monthly premiums for such cover should be much more affordable.

Don't double up on cover
When working out how much additional life insurance you need, don't forget to subtract what you already have.

Always do your homework by adding up how much death-in-service cover, mortgage protection (life cover for your home loan), endowment life insurance and other payouts you already have. After all, there's no use paying premiums for cover you don't really need and will probably never use!