Insurance

Ensure you’re covered

When getting a new job, many people simply sign on the dotted line and often don’t pay enough attention to the risk benefits that form part of their employment contract.

People who receive risk benefits as part of their remuneration package should critically analyse their cover to determine whether they are adequately insured under the employer’s scheme. A regular conversation with a financial planner is, in fact, critical if you want to ensure you have sufficient benefits in place to meet your needs and those of your family.

Even if you receive group benefits, they may not provide adequate financial protection for you and your family’s needs in the event of death, disability or critical illness. The group risk benefits packages offered by employers typically include life and disability insurance, the latter being in the form of lump-sum and/or income protection, potentially also with some critical illness cover options. The amount paid out for lump-sum benefits (be it for death, disability or critical illness) is usually a multiple of your annual salary. However, there may be a large gap between the amount your family will receive and what they will need, and you may have to consider topping up your cover with individual risk insurance.

If you’re an employee, we suggest that you:

Understand for which benefits you are covered. You should also know the amounts for which you are covered and, in the case of income benefits, for what period of time.
Get clarity on when your cover is likely to change. As you get older, the amount to be paid out (the multiple of your salary) may decrease, so your cover may be impacted. Conversely, particular life events (e.g. birth of a child) may qualify you for enhanced benefits. Certain benefits may be offered as ‘accelerated benefits’, which means a claim for one benefit may reduce the remaining insurance on another.
Find out under what circumstances you might no longer be eligible for certain benefits such as life insurance. In some instances, if you claim for disability, you might no longer have life insurance, or you might need to continue paying premiums to ensure you have cover.
Ask about the process of nominating your beneficiaries. Neglecting to name the beneficiaries of your risk benefits could result in a potentially lengthy legal process upon your death, leaving your dependants out of pocket or even destitute until your estate is wound up.
Find out the tax implications of your group risk benefits package. You may, for instance, think your beneficiaries will receive 12 times your annual salary if something happens to you, but various forms of tax could reduce this amount considerably.
Ask about the level of flexibility in your company package. What happens if you are retrenched, or if you resign or retire? Does your cover cease, or can you convert it to an individual risk insurance package? Is there a time frame within which this must take place?
Study the terms and conditions of your group risk policy. Are there waiting periods and possible exclusions? And what is the definition of each risk benefit? For instance, with disability cover, many people don’t pay attention to definitions (permanent or temporary). They usually think they’ll receive a payout in the event of any impairment. This may not be the case if they have only permanent disability cover. For income disability products the definitions are equally important as every impairment will not necessarily preclude you from working and the claim might therefore not be admitted as a disability.

It is advisable to review your risk cover whenever a major life event occurs. However, to keep it top of mind, monitor your benefits at least once a year to ensure they continue to meet the needs of those who depend on you.