My Job Has A Death On Benefit Of Service – Should I Eliminate Life Insurance Or Do I Need Both?

I have just started a new job and it comes with a death in service benefit of five times my salary.

I am a single mother of two, and I took out life insurance when my eldest son was born.

Now I am wondering if it is worth having in addition to the work life cover or if I should cancel it?

LifeSearch insurance policy advisor Emma Walker responded as follows: Congratulations on your new job and the good news is that they offer you death to life coverage as an employee benefit.

Although the coverage provided by the employer is generous, since the payment is usually two to four times the person’s annual salary, it is not ideal to rely solely on this cover as the basis for protecting your family.

Employers can always remove or reduce the benefits they offer their employees.

In addition, if you later decide to leave and transfer to another job, your employer may not offer death in service benefits or life insurance at the same level.

It is best to look at any death on life coverage that is offered by your employer as a bonus to supplement the life coverage you have.

Your Cover Provider provides you with the peace of mind that Cover is always there to help, if needed, regardless of any job commute.

The important thing is to review the protective cover regularly to ensure it is still appropriate and at the appropriate level, given any change in your circumstances.

For example, you mentioned that the original life cap was removed after the birth of your first child.

If you haven’t revised your coverage since then, it may mean that the level of coverage and policy duration may now not be at the correct level or that the term is too short.

You need to make sure there are enough funds to cover both of your children until they are adults and at a level that will help them have a good quality of life.

For example, research from the Child Poverty Action Group in 2017 found that the average cost of raising a child as a couple up to the age of 18 was £75,436 – not including private school tuition fees, university fees or higher education on top of that.

The level of coverage required is often underestimated. It is common to think that the money required should be based only on two or three years’ salary.

But for a new child, the required amount should be enough to help him till he reaches the age of 18 or even 21.

Any savings are unlikely to help over this time period, especially as savings in the UK are at an all-time low – two out of five people have less than £1,000 to fall back on in case it rains.

What’s cool is that the protective cover can be arranged in different ways. One of the most cost effective policies is the family income policy.

So instead of receiving a payment as a lump sum, it is possible to receive payments on a monthly basis, or a combination of the two.

This flexible approach is especially popular for families where a lump sum is available to meet obligations such as a mortgage, car loan, or debt and the monthly payments help with more regular household expenses.

Also keep in mind that many parents buy life insurance in the event that one of them dies, but it is more likely that the parent will be out of work due to long-term illness or accident, rather than death.

Providing alternative income may be the priority and need not be expensive.

One final point to check is if the original life cap was linked to inflation.

Inflation rates have remained low for some time, with consumer price inflation below 3 percent since 2012.

But rising inflation can greatly affect the actual value of the money available in the future.

Linking the cap to inflation can mean that the premium is more expensive, but it will help ensure that the amount when paid is still of real value.