Making the most of group risk cover

The Connector
27 June 2022
3 min read

Group risk cover is the collective term used to refer to life cover, disability cover, and dread disease cover. Many employers and/or retirement funds offer these types of benefits, and sometimes funeral cover as well, as an added benefit for their employees.

The premiums charged for this cover are directly related to the insurer’s claims experience. It is undeniably true that many of us have felt the terrible impact that the Covid-19 pandemic has caused over the past two years. Many of us have lost loved ones. It has also caused financial hardship, with one of the impacts being a significant increase in the premium rates for risk benefits.

To put this in context, the amount claimed in terms of death claims by some funds over the past two years has exceeded the premiums paid by more than double. Insurers are therefore looking to recover these amounts by increasing their premium rates significantly.

On the plus side, it is expected that claims will normalise over time, particularly as members are vaccinated and the medical industry finds new ways of managing the pandemic and its effects.

Many employers and retirement funds allow for what is known as a “conversion option”. This option allows employees to convert their existing risk benefits at resignation or retirement to an individual policy, subject to the insurer’s normal terms and conditions. This can often be done without the need to provide proof of good health. However, the premiums charged will be those applicable to the individual, and these are likely to be higher than the group rates previously enjoyed.

An important point to note is that all employees need to nominate beneficiaries for their life cover outside of the fund (unapproved group life cover) and their funeral cover separately from their fund benefits. Failure to submit and keep any of these forms updated may cause delays in payment of the life cover outside of the fund (unapproved group life cover) and the funeral cover and could also have a financial implication in terms of estate duties and tax. If these forms for these benefits are not submitted, the benefits will be paid into the deceased employee’s estate.


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