Personal vs Employer-provided Cover - Same same, but different

Take it from us, the need to ensure your ability to earn an income and making doubly sure that your loved ones are taken care of if things “go sideways”, is of the utmost importance.

At the very least, individuals take out a life insurance policy and include benefits such as disability or critical illness cover. But, did you know that, depending on the package that your company offers, a lot of these all-important benefits could be covered by your employee benefit (EB) cover?

We need to point out that taking out cover in your personal capacity is not entirely the same as when it is provided through your company.

Here is an important difference that you should be aware of:

Free cover limit (FCL).

Unlike insurance in your personal capacity, when cover is offered by your employer under what is called ‘a group risk scheme’, the insurance company will determine the FCL.

This refers to the maximum amount of cover that an insurance provider will give a member without the member having to give medical evidence of health. This perk applies only to group risk schemes as it would be too expensive to medically underwrite each member.

For a lot of employees, this perk is ideal as they wouldn’t have to fill out scrupulous medical underwriting forms or undergo time-consuming medical tests to get cover. Which is what you would have to do for cover in your personal capacity. However, take caution! It is your responsibility and not that of your company to check whether or not you have enough cover for your needs.

If you find that you do need extra coverage over and above the FCL, you do have the option to do so. In this case, you will be required to undergo medical underwriting and tests, based on the policy’s Ts & Cs.

Without this medical evidence, the additional coverage may not be granted by the insurance company and will, therefore, remain capped at the FCL. Nevertheless, if granted, benefits that exceed the FCL will only be underwritten by the difference. For example, if the FCL is R10 000 and you increase your benefit to R11 000 based on your salary then you will be underwritten for R1 000.

Last, but not least, like cover in your personal capacity it must be truthful during medical underwriting if you are opting for cover over and above the FCL. If you do not truthfully disclose your health profile, at the claim stage the extra cover may be declined and only the FCL will be paid.

What’s more, there is a one year waiting period for those who have just joined a group risk scheme and who have a pre-condition. This means that even if you have fully disclosed this and claim on that particular condition, the insurance company may not payout, EVEN on FCL. Similarly, if you contract a condition after the medical underwriting, you will also be covered up to the extra amount granted.

Without the right guidance, employee benefits can be a daunting and complex matter when it comes to the fine print and technical terms. Talk to a PBA financial advisor to ensure that you are fully aware and understand the nitty-gritties of your cover.

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