Many South Africans believe that the group life and disability cover provided by their employers is adequate, but is this really the case? Here are some differences between group and individual life cover that may surprise you.
Differences from a tax point of view
Most group life cover policies are tax deductible meaning that the cover will be taxed when it is paid out – in other words, you’ll receive less than the value of your policy. This is not the case with personal life, disability and severe illness cover, which is paid from after-tax money. This means that the lump sum paid to you is tax free.
Differences in waiting periods
Most group disability cover has waiting periods that range from three to six months before paying out. Many people don’t realise that until the group cover pays out, they will have to pay for the living expenses. These months can seriously deplete your emergency cash fund or life savings. By contrast, personal life and disability cover generally has no waiting periods.
Ownership of the policy
If you have private disability and life cover, you are the life assured and owner of the policy, whereas group life cover, the employer is the owner of the policy.
Important differences in policy pay-outs
On the important issue of pay-outs, it’s important to remember that group life cover only pays out in the event of death and disability.
If your disability is work related, the policy will only pay out if you cannot work in your occupation any longer. However, if you had a mild heart attack or stage 2 cancer for which you need treatment and a few weeks off work, the disability cover would not pay out, because you’d still be able to work within a certain time period.
In this case, you would be forced to take sick leave or even annual leave while you recover. Personal severe illness cover will usually pay out, even for milder illnesses, providing you with essential funds during your time of recovery.
If you’d like to make your life policy more comprehensive, contact me today and I will work with you to make sure you are covered.
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