By Karen Bongers, 21 September 2020
Karen Bongers, Product Actuary at Sanlam, says that people who receive risk benefits as part of their remuneration package should critically analyse their cover to determine whether they are adequately insured under their employer’s scheme.
Even if you are fortunate enough to receive group benefits (which means benefits from your employer), it may not be sufficient to provide adequate financial protection for you and your family’s needs in the event of death, disability or critical illness. Bongers says that although group benefits add significant value, it’s concerning when people assume that their risk needs are fully covered if they have group benefits.
“The group risk benefits packages offered by employers typically include life and disability insurance, the latter being in the form of a 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. There may, however, be a large gap between the amount your family will receive and what your dependants will need, and you may need to consider topping up your cover with individual risk insurance,” she explains.
If you’re an employee, Bongers suggests that you ask your HR department the following six questions.
Study the terms and conditions of the particular group risk policy. Are there waiting periods and possible exclusions? And what are the definitions of each risk benefit? For instance, when it comes to disability cover, many people don’t pay attention to definitions (permanent or temporary) and they usually think that they will receive a payout in the event of any impairment. However, this may not be the case if they only have 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 may therefore not be admitted as a disability.
Bongers says it’s advisable to review your risk cover whenever a major life event occurs, such as marriage or the birth of a child. “To keep it top of mind, however, monitor your benefits at least once a year. In this way you will ensure that the benefits remain up to date and continue to meet the needs of those who depend on you.”
She says a regular conversation with a financial planner is, in fact, critical if you want to ensure that you have sufficient benefits in place to protect your needs and those of your family. “Armed with the information you have received from your company’s HR department, a financial planner will be able to conduct a comprehensive needs analysis and provide you with a holistic picture in terms of the current and future financial requirements for both you and your family,” concludes Bongers.