When trying to decide between a relevant life policy vs death in service, it can be helpful to understand the differences between these two forms of occupational insurance. They are both insurance policies that can help protect your loved ones in the event of your passing. In this article, we’ll take a look at the differences between a relevant life plan and business life insurance. This will help you better understand these two important policies.
What Is Death In Service Or DIS?
Sometimes known as death in service benefit, is a form of occupational benefit that is offered by employers. It’s a form of insurance that offers financial compensation for a loved one in the event of your death while working for a company. A nominated beneficiary is assigned to the policy, so if the policy is ever used this person received a lump sum payment. The payment is usually in the range of two to four times your salary. However, the lump sum varies depending on the policy. Employers aren’t legally required to provide this type of coverage to employees.
What is a relevant life policy?
A relevant life policy, also known as life insurance or death cover, is a form of insurance that provides a cash lump sum to a beneficiary in the event of death or critical illness. You can pay a monthly fee or annual payment to an insurance provider to obtain life insurance and it is used to protect your loved ones from financial difficulties in the event of serious illness or death. The payments can help go towards funeral arrangements, mortgage payments, debts or living expenses.
Relevant Life Policy vs Death In Service
Although these two forms of insurance have a lot in common, they are different. Death in service is an employee benefit that financially helps the families of employees in the event of their death. Life insurance, on the other hand, is a standalone insurance policy that an individual arranges for themselves. It functions in a similar way by offering financial help to loved ones, but you choose how much is paid out. It acts as a way to help with living expenses, mortgage payments and other financial obligations, whereas death in service provides a payout that is a reflection of salary.
How is death in service paid for?
One difference between death in service and a relevant life policy is that you don’t directly pay for death in service. Whereas a relevant life policy is paid for by you. You receive death in service as an employee benefit, so you don’t actually pay for it directly. It’s worth factoring in your death in service benefit when looking at life insurance policies, as it can lower your insurance premiums. If you leave a company that offers death in service, then you lose the benefit.
Who is the beneficiary in the death in service or life insurance policy?
When setting up death in service benefits, a discretionary trust is usually established. This gives trustees, in this case, the company, the final say over who receives the payout. In most cases, you can nominate a beneficiary such as a spouse. But it’s a good idea to discuss this with your employer to ensure it is set up correctly. One thing to note is that you can’t use death in service benefits to pay for a mortgage outright. However, beneficiaries could receive the money and then use it to pay for the mortgage.
Relevant life policies give you more flexibility when it comes to who is the recipient of any payouts. There are all sorts of frameworks you can set up for this. For example, establishing a trust for multiple beneficiaries, assigning it to a mortgage or incorporating it as part of your estate.
Is the underwriting process different between a relevant life policy and death in service?
Underwriting is an insurance process that insurers use to assess policies. This is used to determine whether a policy can be offered to an individual. This is usually accomplished by asking a series of vetting questions to establish your lifestyle, health and risk. Death in service benefit doesn’t go through any underwriting, whereas a life insurance policy does.
For more information on relevant life policy vs death in service, get in touch with Wis Business Protection today.