Employee Benefits
Group Life Cover
“affordable Life Insurance”

Group of four diverse silly employees taking self portrait and making symbolic hand gestures at small office in front of bright windows

Employers Providing Financial Security for Employees

What is Group Life cover?

Concerned and caring employers who want to provide their business and employees with the ability to access risk benefits like death, disability, income replacement, funeral cover, etc., use group life arrangements tailored to the financial needs of the employer and employees. 

Group life arrangements are offered on an employer group basis providing for group underwriting and pricing. Therefore, employees that may not qualify for life cover in their personal capacity can access life cover within predefined limits. Recent developments have enhanced the product to provide access to small employers, including sole proprietors and SME’s. 

As explained above, this product aims to offer death, disability, income replacement, funeral cover, etc., for the group members. 

What are the benefits of Group Life? 

By implementing group life benefits, an employer can affordably display and provide access to employees’ financial needs and objectives. Therefore, group life is encouraged, as it ensures access to risk cover at affordable rates. In addition, financial security and provision is provided at death or disability in the form of a lump sum or monthly payout for the employee or loved ones. 

Employers should only implement group life benefits after a comprehensive financial needs analysis or after concluding an employee benefits perception, needs and satisfaction survey. In addition, employees must analyse and review their personal financial plan and life cover to avoid duplication of benefits or establish the appropriateness of cover in their individual capacity. 

If group life benefits are implemented with care and effective communication to include awareness and education, the business (Employer and Employees) is reminded of their common purpose and participation of commitment to productivity and safety. 

How does Group Life cover work?

Group life benefits are affordable when compared to implementing an individually underwritten life policy. This is made possible due to the benefits of group underwriting. In addition, the more diverse the group is in terms of age and health status, the greater the prospects of achieving competitive premiums. 

The size of the group is significant as it improves the prospects of diversity. The type of activities conducted by the employer within the business (heavy industry versus administrative and the mix) also plays a role in the pricing process. Group life products are based on compulsory participation by all designated categories of employees.

It is generally a benefit that the employer pays for entirely. However, what has also been done by employers and intermediaries is to ensure that proceeds from group life benefits are not spent on the immediate costs associated with the death event. Group funeral benefits are generally included to cover the immediate cost of death. 

What happens when and if I leave my place of employment or organisation?

Group life solutions are implemented and defined by the relevant employer group. In other words, it is employer-specific, meaning that when you leave the employer/group, you leave the fund. 

Most group life arrangements allow for conversion options, and by exercising this option, generally without underwriting, you can convert to an individual policy. However, there are cost implications when doing this. You will forfeit the benefit of group underwriting, and as such, the premium you will be offered via an individually underwritten policy would be higher.

Therefore, it is suggested that when you are negotiating new employment contracts, you inquire about the availability of group life benefits so that you can continue to enjoy the cost-benefit of group underwriting.

Can I use the policy as surety or cede it to third parties?

Group life policies are held by the employer and are not accepted as surety, nor can you surrender it. If this is a need you have, you would need to implement an individually underwritten life policy. 

How do I participate or set up Group Life for my Company? 

When considering implementing or simply needing advice in structuring group risk benefits, you are encouraged to seek an independent intermediary like Phoenix Employee Benefits, which specialises in employee benefits. Specialist employee benefits consultants will ensure that the process is holistic and appropriate for the employer group.

Author: Reynold Patrick King
Managing Director
Phoenix Employee Benefits

DISCLAIMER

This blog does not constitute financial advice. The content is intended to provide information for educational purposes. We recommend that interested parties contact Phoenix at the contact details listed or their financial advisors for a comprehensive review and needs analysis followed by the required record of advice.

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