In one word, no…I would not recommend that you replace your life insurance policy with a death in service benefit.
If your employer offer death in service benefit as part of your remuneration package that is great news, it’s also free so it must be tempting. Still, I am sorry to disappoint you but you should make sure you have both benefits in place. Read on In case you wish to understand why;
- The benefit depends on keeping your job: It stops as soon as you stop working for the firm. If you have no other life insurance in place, your family could therefore be vulnerable if you switch jobs, are sacked or made redundant. If you then want to buy your own life insurance policy, you might have to pay a higher premium as you will be older and perhaps in poorer health.
- The size of your benefit: Death-in-service benefit is also unlikely to cover all your life insurance needs. Advisers tend to recommend life insurance of up to 10 times your annual salary, way above the maximum death-in-service pay-out. But, of course, your actual sum insured will depend on your own circumstances and requirements.
- What if you need to link it to your mortgage? You should be aware that you cannot assign death-in-service benefit to a mortgage. So if you want to link your life insurance to your home loan, you will need to buy your own cover.
- You can structure it as you wish: Separate, stand-alone life insurance is much more flexible than death-in-service benefit. You can decide how much cover you need, the length of the term and the beneficiaries.
In addition, there are different types of policy. For example, you might choose decreasing term insurance to run alongside your mortgage, so the pay-out gets gradually smaller in line with your dwindling debt.
Not sure what is the best option for you? Get in touch with me to discuss your personal circumstances and consider the options open to you.