ILLUSTRATION BY GARETH GREY62 GQ.CO.ZA OCTOBER 2017
If you don’t understand the group life cover
you have you may leave your dependants
ver y out-of-pocketlower than those for
low-income security
company employees,
who face a much
higher risk from both
the nature of their
lifestyles and the
dangers of their jobs.
In both groups,
those in low-risk
categories subsidise
those who can be
classed as high-risk,
either from a health
or job point of view.
Group life
assurance covers you
and your dependants
against death and
disability (and being
unable to earn a
living). Generally
group life cover will
pay out between two
and four times your
annual pensionable
income or salary, and
either pay a capital
amount or an
ongoing income
(between 75 and 100
per cent) if you are
disabled. Group life
cover, particularlywhen it comes to disability, is a lot more
complex than this. If you do not understand
the group life cover you have you may leave
your dependants very out-of-pocket.
Group life cover can be approved or
unapproved; the latter is taken out by your
employer on your behalf, and the premiums
are paid with after-tax money. Th is means any
benefi ts paid are tax-free, and you decide who
will benefi t from the proceeds when you die.
Approved group cover is held in the name
of your retirement fund and is subject to the
rules of your fund. Th is means:- Th e premiums are added to the total
retirement fund contributions that you are
permitted to deduct from your taxable income
(27.5 per cent capped at R350 000 a year). At
death, the assurance benefi ts are combined
with your accumulated retirement pension
benefi ts and any portion taken as a cash lump
sum is subject to retirement fund lump sum
tax, or the dependants can take the money as
an income fl ow, taxed at their marginal rate. - Th e trustees of your fund decide who is
entitled to the proceeds of these benefi ts. Th e
trustees are obliged by the Pension Funds Act
to consider your legal (direct family) and
fi nancial (for example, an unemployed third
cousin you have
been supporting)
dependants and
the extent of the
dependency – past,
present and future.
Benefi ciaries who are
not dependants are
considered last.
Th e fact that
you have group life
assurance does not
mean you can sit back
and relax. It is unlikely
that your group life
cover will be suffi cient
to cover the needs of
your dependants.
Here’s what to do:- Update your
benefi ciaries annually,
stating how much you
believe each of your
dependants should
receive and why. - Get the details of
your group life cover,
particularly whether it
is approved or not, as
the tax consequences
will aff ect how much is
paid as a benefi t. - Ask your fi nancial
adviser to draw up
a fi nancial plan to
determine whether you
need any additional life
or disability cover. - Check if there is
a continuation option
that will allow you to
keep the cover in place.
If you resign, are
retrenched or fi red,
your group life cover
falls away, but you
may be able to continue
as an individual
policyholder, meaning
you will not have to
undergo a health
check-up to get new
cover.
Words by Bruce CameronHere’s how to
make sure your
dependants aren’t
left in the lurch
when you’re six
feet underHOW
HEALTHY
IS YOUR
LIFE
COVER?
T
here you are. You are not the perfect GQ
male specimen. You suff er from a
serious congenital heart condition, your
liver is failing from all the alcohol you’ve fed it,
you have a wracking cough from smoking 30 a
day, you are diabetic, obese and have high
blood pressure. You are a sad case. Frankly,
you’re unlikely to get a life assurance company
to give you assurance on your life to provide
for your spouse and two ex-spouses and 10
children when you drop dead. Even if you do,
you’ll pay a high premium and have certain
conditions (possible causes of death) excluded
as a benefi t payout to your dependants.
But if you are employed and there is group
life assurance attached to your retirement
fund, you will get life assurance cover at the
same premium as Jill, who sits at the desk
next to yours. She is perfectly healthy and has
a six-pack you can only dream about.
Jill is subsidising you.
Th ese are extremes, but it highlights a very
important benefi t that many employees
receive: life assurance without any need, in
most cases, to have a medical check-up, or
even declare that you are a moderately, let
alone dreadfully, unhealthy person.
Group risk cover is priced by an assurance
on the anticipated deaths of the group as
a whole – not on you as an individual. So,
if you work for, say, an IT company with
high-income employees who are aware of the
need to and can aff ord to live healthy lives, the
premiums for the employee group will be