Death in service insurance for employers is group life cover: one policy, paid for by the employer, that pays a lump sum if an insured employee dies while working there, as a fixed sum or a multiple of salary. The money normally goes to the trustees of a discretionary trust, who decide who receives it, and HMRC treats the arrangement as either a registered scheme or an excepted group life policy.

The cost depends on who is covered and for how much, so it is priced scheme by scheme. For a figure based on your own headcount and payroll, you can ask an FCA-authorised broker: the request form here is free and ends in a call-back. This page is general information, read in October 2026; tax rules can change.

What is death in service insurance, and who takes it out?

Aviva’s Excepted Group Life technical guide (EDCO2813 0126), written for employers and advisers, says "The whole cost of the policy will be met by you." The employer sets the eligibility conditions, such as entry ages and any service qualification; cover cannot continue past a member’s 75th birthday, and partners can be covered if all are included. Canada Life’s employer page (read 20 October 2026) lists directors and part-time, fixed-term and temporary employees among the staff it can cover.

The payout does not go to the business. HMRC’s Insurance Policyholder Taxation Manual (29 April 2022) rules out an excepted policy that names the company as beneficiary of the death benefits; the recipients must be individuals or charities. The scheme sits in a discretionary trust, which can be the employer’s own or, with some insurers, a master trust; the Aviva guide says the insurer will cease a policy if it finds no such trust in place. HMRC’s inheritance tax manual (11 February 2016) describes the employer as the trust’s settlor, with the trustees choosing who receives the lump sum and in what proportions. Legal & General’s Mastertrust brochure (Q0043287 05/26) says they weigh the employee’s expression of wish form and the circumstances at death.

Cover that pays the business instead is in what key person insurance is for. How a scheme runs day to day is in group life assurance cover, the employee’s side in do you need life insurance if you have death in service benefit, and a public-sector scheme in NHS death in service benefit.

Registered or excepted: how does HMRC treat a group scheme?

Legal & General’s Flexible Group Life technical guide (May 2025 edition) says an employer can insure the benefits through a scheme registered with HMRC, as an excepted group life policy, or split them between the two. HMRC’s inheritance tax manual says the excepted version "is not a registered pension scheme or an employer-financed retirement benefits scheme". Aviva’s two technical guides (EDCO2801 and EDCO2813) set out the practical differences:

Registered schemeExcepted group life policy
Set-upDiscretionary trust; an administrator "registers the scheme with HMRC and obtains the PSTR"Discretionary trust
Levels of coverDifferent bases of cover for different categories of membersThe same level for all members; different levels need separate policies
Member’s lump sum and death benefit allowanceThe lump sum counts towards itThe benefit does not count towards it

For an excepted policy, the Insurance Policyholder Taxation Manual sets the conditions. The age limit "must not exceed 75 years". Benefits follow one formula for everyone, so three times salary for one group and five times for another under the same policy "would not be acceptable". Only death benefits are allowed. HMRC has no approval process: insurers, policyholders and advisers satisfy themselves that the conditions are met, throughout the policy’s life.

What does death in service cost an employer, and how do you get a quote?

We found no published average premium to rely on. What moves the price is set out in Aviva’s excepted guide: the amount of cover, the ages and sex of the members, the industry and the employer’s principal activity, members’ salaries and the claims experience. It normally prices schemes of up to 199 members on age-related rates and larger ones on a weighted average rate; its quotes are "normally valid for three months", and cover starts when the employer’s adviser asks it to begin.

Canada Life lets an employer choose a multiple of salary "up to 10 times their salary", or one fixed amount for all employees. For a quote, it asks for employer details, the benefits wanted, the age cover should end, and each employee’s details such as date of birth, salary and occupation.

The free cover limit is the most a member can be covered for without giving medical evidence; HMRC permits one in an excepted policy to limit "the insurer’s exposure". Aviva calls it the automatic acceptance limit, reviews it at the end of each rate guarantee period (usually two years), ties it to the number of members insured, and gives none where a policy has fewer than three members. Legal & General says it usually sets its free limit when it quotes.

A broker reached through the form here can be asked to approach insurers about your workforce, and whether group cover can be arranged at your size; there is no charge.

Is death in service insurance tax deductible, and is it a taxable benefit?

This is what HMRC’s manuals and the insurers’ guides say, not tax advice; the employer’s accountant confirms how it applies.

Excepted policies. HMRC’s Employment Income Manual (28 July 2020) says paying the premiums brings no charge under the employer-financed retirement benefits rules, though other provisions may tax them, and that section 307 may exempt a benefit in kind charge, depending on circumstances. Its section 307 page (13 February 2019) adds that the exemption "does not prevent liability arising under any other provision that charges the cost of providing a pension." The manual pages read are silent on deductibility, so the insurers’ stated understanding is the guide. Aviva treats the premiums as a business expense and not normally a P11D benefit for UK-resident employees, with a possible P11D charge if paid through salary sacrifice, and says relief for employees with a proprietorial interest "won’t normally be available". Legal & General says they "may qualify for tax relief as a business expense if your local tax inspector agrees that they are wholly and exclusively for business purposes".

Registered schemes. HMRC says employer contributions to a registered scheme, which may fund a lump sum on an employee’s death, are not chargeable on the employee as earnings. Its Business Income Manual says a contribution for a director or employee is allowable "unless there is a non-trade purpose for the payment". Aviva and Legal & General both describe the premiums as a business expense (Legal & General: tax-deductible) and not a benefit in kind.

The payout. HMRC says a registered scheme’s lump sum is not taxed as pension income if the member died under 75, it was paid within the relevant 2-year period and the member had lump sum and death benefit allowance left; any excess is taxed at the recipient’s marginal rate as pension income. Aviva’s registered guide adds that, being paid under a discretionary trust, the lump sum does not form part of the member’s estate for inheritance tax. For excepted policies, Aviva and Legal & General say the benefit is free of income tax and does not count towards the allowance, but is subject to the normal inheritance tax rules for discretionary trusts; Legal & General adds that exit and periodic charges may apply.

Does the April 2027 inheritance tax change affect death in service?

From 6 April 2027 most unused pension funds and pension death benefits come into the estate for inheritance tax. HMRC’s technical note (updated 26 November 2025) leaves out death in service benefits paid from a registered pension scheme, and certain dependants’ scheme pensions. The exclusion covers "both discretionary and non-discretionary registered pension schemes".

Finance Act 2026 makes this law. Section 66 inserts section 150A into the Inheritance Tax Act 1984, which applies to members of "a registered pension scheme, a qualifying non-UK pension scheme or a section 615(3) scheme" and excludes an amount payable only because the member was in employment or other work of a particular description immediately before death. Section 71 applies it to deaths on or after 6 April 2027.

Neither the note nor section 150A mentions excepted group life policies, which HMRC says are not registered pension schemes, and the insurers place the excepted benefit under the normal discretionary trust rules. How the 2027 change bears on a particular excepted scheme is a question for its trustees’ adviser. The wider change is in whole of life insurance and inheritance tax.

How does death in service compare with relevant life insurance?

Relevant life is the single-person counterpart. HMRC’s Employment Income Manual treats the excepted group life policy, a policy on one individual meeting the same conditions, and a version with certain excluded benefits all as relevant life policies. The tax conditions are shared; what differs is scale. A group policy insures a defined group on one formula, with a free cover limit and insurers’ minimum member numbers; a relevant life policy covers one person. Its cost and providers are in relevant life insurance cost and relevant life insurance providers; group insurers are in group life insurance providers and other company cover in the business cover guides.

Frequently asked questions

Can a small business set up death in service cover?

It depends on the insurer and product. Legal & General’s Flex product needs "a minimum of 100 members to start a policy", and Aviva gives no automatic acceptance limit where a policy has fewer than three members. For one person, the company-paid equivalent is relevant life insurance.

What happens to cover when an employee leaves?

Aviva lists no longer being employed as a reason cover ends, and Legal & General says a member cannot continue cover at their own expense. Cover outside work is in the employee’s guide, and the self-employed position in death in service for the self-employed.

For a broker to look at group cover for your business, send a request through the form here; it costs nothing.

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