Luke Nel, Head of Protection Solutions at Metropolitan

Employee wellness refers to the overall health and satisfaction of your workforce, encompassing various facets from physical and mental to financial wellbeing. “Providing group life cover isn’t enough to tick the financial box in their employee wellness offering,” says Luke Nel, Head of Protection Solutions at Metropolitan.

“Financial wellbeing extends far beyond insurance. Creating an environment that positively embraces financial inclusion, and education means you will have employees that are informed and who can make good choices. This reduces the amount of financial stress they experience and has a direct correlation with staff retention,” says Nel.

The big misconception

Group benefits like medical aid, retirement fund participation and risk cover can give employees a false sense of confidence that their financial planning needs have been fully satisfied. There are supplementary products – for example, gap cover – that are available to meet medical shortfalls but, in most cases, employees will only seek these products after they’ve had to cover something out-of-pocket and realise the need.

Nel encourages employers to ensure their staff are aware of the considerations that inform adequate life cover for their specific needs. “The misconception that employer-provided life cover is enough can leave dependents vulnerable. It’s always wise to calculate your actual needs, consider debts, dependents’ future expenses, and rising costs due to inflation.”

Four life cover considerations for employees:

1. Cover amount

Employers often don’t allow employees to alter the amount they’re insured for, so it’s critical for employees to check if the cover is sufficient. For instance, if they receive three times their annual salary of R300 000 in cover and they have R1.2 million outstanding on their bond, the cover will not be enough.

“Employees need to ensure their cover aligns with their personal financial needs. This includes any debt the employee has, along with the varying needs of dependents like spouses’ household expenses and children’s education. This will inform the amount of life cover that’s required. Employees can speak to a financial adviser to supplement their employer-provided cover with individual policies to ensure adequate protection for their families,” says Nel.

2. Debt and estate planning

Employees must consider how life cover interacts with their debts and estate. If the policy payout is insufficient to cover a bond or other liabilities, dependents may face financial strain including losing their home or vehicle which is required to earn an income.

“If the payout is made to the estate, creditors are paid first, which can potentially leave little for the intended beneficiaries. Even if the benefit is paid directly to a surviving spouse and there is still a bond outstanding, those payments will need to be settled,” says Nel.

“Life cover is also an efficient way to create generational wealth as payouts made directly to beneficiaries are not taxed as part of the deceased’s estate,” says Nel.

Employees should calculate their debt and ensure the cover exceeds these amounts, leaving enough for their families to meet other needs and replace their lost household income. Financial services providers can educate staff about these factors to improve financial literacy and ensure adequate protection for surviving family members.

3. Beneficiary flexibility 

Some group life policies restrict beneficiaries to a spouse and two dependents, which can be limiting. Employees should ask whether the policy allows changes to beneficiaries in cases like divorce or changing family dynamics. Without flexibility, dependents could be left out, or outdated allocations might apply.

Employers can enhance employee satisfaction by offering schemes that adapt to personal circumstances. Guaranteeing this flexibility empowers employees to adjust their life cover according to their family’s changing needs.

4. Insurance continuation

Continuation, or the ability to continue or transfer your policy, is another key consideration for employees. If they’ve been paying for a group life cover policy for years and decide to switch jobs, they need to check whether they can take their policy with them. Unfortunately, many employer-provided policies don’t allow for this which means employees will lose their cover when they change jobs. This can leave a significant gap in protection during transitions or increase premiums significantly. “Employers could offer continuation options or partner with insurers who they do so, to make life cover more beneficial for long-term financial planning, ensuring employees aren’t left unprotected,” says Nel.

The insurance company offering these benefits will be able to educate employees and ensure they understand financial planning at different stages of life. “This is not the responsibility of the employer, but a good financial services provider will be able to empower employees with the information they need to make sound financial decisions. The employer then just needs to provide the platform,” concludes Nel.

ENDS