Britons receiving a death in service benefit from a loved one’s employer aren’t paid enough to pay off an outstanding mortgage, Direct Line Life Insurance has found.
Brits receive on average between one and two years’ of their salary, estimated to be between £27,600 and £55,2002.
However, if all these funds were paid towards an outstanding mortgage balance at the time of a person’s death, it would still leave the average Briton with a mortgage shortfall of £67,6783.
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, especially having lost an income, adding extra pressure at an already emotional and difficult time.”
Some 89% 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.
But almost a fifth (17%) didn’t even know what death in service is and 11% didn’t know not know if they would be covered by their employer.
In addition, millions of workers had no idea how much those left behind would be eligible to receive, as 42% of employees with this benefit had no idea how much would be paid out to their loved ones in the event of them passing away.
A further 18% believed death in service is a direct replacement for life insurance, despite coverage levels typically being far lower and people not being covered if they are between job roles. Despite this, more than one in 10 (13%) Brits mistakenly thought this is the case.
Morgan added: “Life insurance is not something anyone wants to think about. It’s easy to say ‘I’ll think about that later’ or put it off for a rainy day, but it’s important to be prepared for your financial future, no matter what life may bring.
“Although it can appear intimidating, it’s important to plan for your financial future, it’s not as boggling or as expensive as you might think.
“Direct Line Life Insurance offers an affordable way for families to help look after loved ones financially if someone passes away, paying out a lump sum, to help deal with every day money concerns such as household bills, childcare costs and mortgage payments.”