Is life cover necessary when you have group risk cover?
Group cover provides financial protection in the event of injury and death , but is it it enough on its own? Moneyshop finds out.
By Athenkosi Sawutana
Many consumers believe that being insured under group cover is enough to protect their families in the event of illness or death.
According to Schalk Malan, CEO of BrightRock, the average South African income earner has cover for less than 40% of their financial needs in the event of their death. Their group risk covers only about 15% of this need on average.
Group cover provides a basic level of financial protection for employees and their families, says Malan. He says that the cover is good because it provides a replacement income when you are unable to work due to a long-term illness or injury.
The advantage of group risk cover for employees of an organisation is that they do not need to undergo underwriting which is usually a requirement for individual life cover, says Guy Chennells, head of research and development for Discovery Employee Benefits.
This means that those who would not have received cover in their own capacity can obtain it through the group. With group cover, your employer buys life cover in bulk to insure all employees. That means you pay a lot less than you would if you were to buy your own life cover.
With all these benefits of a group cover, why do you still need a personal life cover?
According to Malan, group cover is not enough to survive on, let alone pay for additional expenses or maintain your usual lifestyle.
“If you only have group risk cover, you are underinsured, and you will not be able to protect your future paycheques in the event of a serious injury, illness, or death,” says Malan.
Malan adds that three or five or any number of years of salary may sound like a lot, but if you have 20 working years left, it will be impossible to cover the remaining years.
He says that traditional group cover products are one-size-fits-all solutions that fail to meet employees’ and employers’ needs.
“Group risk cover only covers members while they are employed by the employer providing the benefit, so they may lose continuity of cover if they change jobs,” says Chennells.
He adds that the benefit levels are chosen by the employer which might not meet the level of cover that you require.
Malan says employers should consider a needs-matched group cover that allows employees to take their policy when they leave an employer – without medical underwriting. This is customised to suit the needs of each employee.
“Take up an individual needs-matched life cover policy to help protect yourself and your loved ones financially if you were to die, become too ill to work, or become disabled during the length of the company policy,” says Malan.
Many people will use personal life cover to increase their life cover above their group risk cover to a level that meets their financial needs.
A personal life cover policy protects you throughout your life, whether you’re working or not, and into retirement as well. It allows you to choose the level of cover you need and want, says Chennells.
This article has been prepared for information purposes only and it does not constitute legal, financial, or medical advice. The publication, journalist, and companies or individuals providing commentary cannot be held liable in any way. Readers are advised to seek legal, financial, or medical advice where appropriate.