More questions to ask your employer about employee benefits

LIFE COVER

Are life cover benefits approved or unapproved? Approved group cover is held in the name of a retirement fund and is subject to the fund’s rules, Gareth Collier, a director of financial planning firm Crue Invest, says. The trustees of the fund will decide who is entitled to the proceeds of these benefits. The premiums are paid by the fund (usually from the employer’s contributions), and the employer can claim a tax deduction, he says. Unapproved group life policies are a group of single life policies owned by the employer, not the fund. The premiums on an unapproved group life policy are not tax-deductible, but the proceeds are tax-free for you, the member.

What level of life cover do I enjoy? Generally, employers will select a multiple of an employee’s income when determining the quantum of life cover, Collier says. For instance, your life cover could be set at twice your annual income. So, if you earn an income of R500 000 a year, your group life cover will pay out R1 million on your death. You need to determine whether the level of life cover is sufficient for your needs. Once your group cover is in place, you should ask your financial adviser to draw up a financial plan to determine whether you need any additional life or disability cover to supplement your group cover, Collier says.

What is the free cover limit attached to this benefit? The life assurance company that your employer or retirement fund is using will analyse the risk profile of the group as a whole and will determine a level of risk cover that the members of the group can enjoy without any medical underwriting. This benefit would be significant for anyone who has a medical condition or a pre-existing condition or illness, Collier says.

If I resign from the company, is there a continuation option that will allow me to keep this cover in place in my personal capacity? A continuation option is a significant benefit, Collier says. Without it, if you resign for whatever reason, your group cover will fall away. You will need to apply for cover in your personal capacity, which will be subject to individual underwriting, and this could result in exclusions on your policy, particularly if your health has deteriorated.