What happens to my death in service if I become unemployed?
Death in service is a benefit that is provided by some employers so that in the case of death while the employee is still working with the company, the company will pay a tax-free lump sum to their family or beneficiaries.
In most cases, the employer will purchase a life insurance policy that covers the employees, but it is only on offer to the employee when they are employed by the company. If the employee seeks alternative employment or is unemployed, they will no longer be eligible for death in service. This can raise questions for those who are in this position, particularly if they have a partner or children to consider and are the key earner in the family.
Earlier this year, we were approached by a couple with a young family who were facing exactly this problem.
Who we helped
As the key earner, Jack* wanted to be sure that if anything happened to him, his wife and children would be taken care of and financially secure. Part of this was the security of having a death in service at his employment. However, when Jack left his employment and decided to take a break before seeking alternative employment, he was no longer eligible for death in service.
Jack and his wife, Amara*, felt unsure about what would happen to their family if anything did occur and left them without a key earner. With these potential circumstances weighing on their minds, Jack and Amara approached ML Financial Associates to gain advice and support.
After discussing the family circumstances, plus the couple’s income and expenditure against their assets and liabilities, ML Financials advisors discovered that Jack and Amara would have been significantly under-insured even with the Death in Service.
The Goal
The goal was to ensure Jack and Amara were insured and were able to cover liabilities, childcare and key costs of living in the event of death. Therefore, ML completed a full review of the client’s situation to identify any gaps in the following areas:
- Mortgage Protection
ML reviewed the mortgage that Jack and Amara had in place, discovering that the couple had a large mortgage that could not be paid without the key earner being in work, regardless of the Death in Service.
- Income Protection
ML reviewed the couple’s monthly bills, discovering that these would be impossible to cover fully without the key earner being in work.
- Childcare Costs
If the lower earner passed away or was unable to work or care for the children, the key earner would need to be able to fund childcare so that they could continue working and cover all bills.
It was clear from the review that even with the Death in Service, Jack and Amara would have found it extremely challenging to meet their commitments without the key earner’s income.
The Solution
While the results of the review were concerning, our expert financial advisors were able to put the couple’s mind at ease by sourcing affordable protection policies. The policies would mean that if either of them passed away or was out of work due to a critical illness, the family would be able to cover all the key living expenses effectively.
Additionally, during our review, the couple also identified that they would prefer to leave a legacy to each of their three children if one of them were to pass away before the child reached the age of 30. ML Financial Associates were able to source a policy for each of the children to ensure that they would still be able to help their children if they bought a home, got married or decided to have children of their own.
A Secure Financial Future with ML Financial Associates
Our young couple were able to walk away from us knowing that if anything did happen to either the key earner or their spouse, their children would be able to grow up in a financially secure environment. Moreover, Jack and Amara are also able to rest safe in the knowledge that in the unfortunate event of death, their children will be looked after up to the age of 30.
If you’re looking for financial advice on family protection in Norfolk or Northampton, contact our financial advisors today for a consultation.
*Names changed for privacy
