Work death benefits leave major shortfall

People receiving death in service benefits from a loved one’s employer would still end up with a mortgage shortfall of more than £67,000, a report has claimed.

A typical death in service benefit is between one and two years’ of salary – estimated to be between £27,600 and £55,200 – according to analysis from Direct Line.

Despite 89 per cent of employers surveyed offering a death in service benefit – which will pay out in the event of death, so long as the individual who passed away was under contract and qualifies for the benefit – almost a fifth of those surveyed do not know what death in service is and 11 per cent do not know if they would be covered by their employer.

In addition, 42 per cent of employees with this benefit have no idea how much would be paid out to their loved ones in the event of them passing away.

Jane Morgan, business manager at Direct Line Life Insurance, said: “There is a great deal of confusion and misunderstanding regarding ‘death in service’.

“While it would be an invaluable employee benefit for many families if the worst were to happen, the amount paid out is unlikely to cover their outstanding mortgage balance.

“This could leave families in a financially vulnerable position.”