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Benefits of employer provided group risk cover

Group risk cover is a good vehicle to help protect you against the possibility of something happening to you where the ability to earn a living is compromised.

It is insurance cover that is provided by an employer to their employees and is only applicable to employees while they work for that employer.

In this arrangement employees enjoy lower premiums than they could obtain for similar cover in their individual capacity. There is also a certain level of the benefit that is provided without having to undergo a medical assessment.

How does group risk cover work?

With group risk cover, an employer will typically put together a package of benefits for their employees to cover their employees in the event of death or disability. The benefits can typically include some or all the below benefits:

A lump sum benefit equal to a multiple of annual salary payable to nominated beneficiaries

A lump-sum benefit equal to a multiple of annual salary payable if you become permanently and totally disabled according to the definitions of the policy

A monthly income benefit payable to individuals who can no longer work because of a disability. This is payable after a waiting period for as long as you are unable to perform your own or similar job.

A lump sum benefit equal to a multiple of annual salary payable if the policyholder is diagnosed with a life-threatening sickness or disease.

Lump sum payable for funeral expenses in the event of the main member and/or spouse or immediate family member’s death.

Death benefits can be provided as either an approved benefit or an unapproved benefit.  The main differences between approved and unapproved death benefits are as follows:

Approved benefit

  • Approved benefits are linked to a retirement fund and the proceeds of the benefit are paid to the retirement fund to be added to the retirement fund benefits and then paid to beneficiaries.
  • The first R500 000.00 is tax free, and the balance of the benefit is taxed
  • Premiums are tax free
  • Distribution of benefits is decided by the retirement fund trustees in accordance with Section 37C of the Pension Funds Act

Unapproved benefit

  • An unapproved benefit is paid directly by the insurer to the beneficiaries of the deceased.
  • No tax is payable on the benefit paid to beneficiaries
  • There is fringe benefit tax payable on the premiums
  • Distribution of benefits is according to the beneficiary nomination form. If there is no beneficiary form the benefit will be paid to your estate.

The 27four Umbrella Fund is a simple yet flexible solution to cater for the diverse benefit needs of both members and employers.

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