5 things to know about group risk cover as an employee benefit
Group risk cover is likely to be one of the deductions on your pay cheque if you are receiving employee benefits as part of your monthly salary. But what exactly is it for, and how can it make a positive difference in your life? Schalk Malan, CEO of BrightRock, explains why you might not be covered for as much as you think.
It’s there to protect your income …
It’s important to think of your income as your biggest asset – it enables you to afford necessary assets like a home and car, childcare and healthcare. And if group risk cover is included as one of your employee benefits, it is there to enable you to continue to afford these expenses and honour your responsibilities in the event of a debilitating injury or serious illness. But while the lump sum figures provided by long term insurance products like your group risk cover often look very big, it may not be sufficient to provide you with the income you need. This is because …
Only 15% of your needs are likely to be covered
Most group risk cover products only cover around 15% of beneficiaries’ financial needs. So while your group risk cover plays an important role in providing a basic level of risk cover in your financial plan, you’ll still have to look into signing up for individual cover to fill a financial gap for up to 85% of your financial needs. Newer, needs-matched role players in the market are challenging this industry norm by providing you with twice as much cover. So while cover amounting to 30% of your needs still isn’t sufficient to cover your full financial needs in the event of your death, critical illness, or disability, it goes a long way to closing the gap.
It’s meant to be a long term commitment …
Think of your existing group risk cover as a long term commitment that will provide you access to your lost income when you need it most. While it’s easy to change short-term policies like car or household insurance, it’s not that simple to change a long term insurance policy, because your health deteriorates over time and the likelihood of you claiming increases as you get older. And insurers require tedious medical underwriting to determine how much your level of risk has increased when you want to increase cover. That’s why it’s advisable to place your cover with an insurer that makes it easy to increase your cover when your needs change without having to do be asked health questions or go for blood tests.
But you’ll probably lose your cover when you change jobs
In the modern world of work, where technology continues to create new opportunities, you’re unlikely to stay with the same employer for very long. This means you will lose a substantial amount of your long-term cover when you change jobs, and you might have to sign up for new, or additional cover to make up for a shortfall. But if your employer signed up for needs-matched group risk cover, this might not be the case, as it allows to convert it to individual cover with no underwriting required.
5 Permanent is not as permanent as you think
If your employer is signed up for a traditional group risk policy, it’s likely that you have limited benefits, with limited pay-outs – not to mention a massive amount of red tape when you claim. For example, the majority of group risk cover providers will require permanently disabled employees to undergo continual reassessments after successful claims to keep receiving their income protection benefit payments. Some providers’ critical illness cover is also very limited, covering only a small number of conditions. A needs-matched provider can offer critical illness cover for more than 200 conditions. When it comes to disability claims, a new generation provider will pay out for your valid claim for certain conditions, regardless of whether or not you can still do your job.
So what next?
Check your group risk benefit schedule, and speak to your HR department to check what you’re covered for. If you’re not happy with what you see, or are struggling to get to the bottom of it, contact your nearest independent financial adviser to make sure you’ve got adequate cover.