Understanding company-provided death and disability cover ins and outs
Insuring your ability to earn an income, and ensuring your loved ones are taken care of if something happens to you, is top priority for many of us. At a bare minimum, this usually entails life insurance and ‘insurance’ benefits such as disability or critical illness cover. Depending on your company package a lot of this may be covered through your employee benefits arrangement. But there are some key differences between taking out this cover in your personal capacity – and when it is provided as part of a group arrangement through your company.
This is according to Elna van Wyk, Head of Underwriting and Disability Management at Momentum Corporate, who points to research they have done that shows that although most employees speak English at home and at work, understanding of industry terms and benefits is concerning. “It’s wise to brush up on what the various terms mean to ensure there aren’t any unpleasant surprises for you or your loved ones at claim time,” says Van Wyk.
Understanding “underwriting” and “free cover limit (FCL)” – two important benefit terms
65% of employees surveyed indicated that although they are familiar with the term ‘underwriting’, they cannot explain its definition or purpose. Only 21% are familiar with the term “Free Cover Limit (FCL)”, despite it being widely used in the group insurance industry – including in the policy documents and terms and conditions that are a crucial part of your cover, she explains.
What is the FCL?
“Unlike with an individual insurance policy that you would take out and pay for directly, when your employer provides death or disability insurance under what is called ‘a group scheme arrangement’, a FCL for each group scheme is determined by the insurer. The FCL is the amount of cover that each employee belonging to the scheme qualifies for, without having to provide medical evidence.
“For most employees, this is a good thing as you don’t have to complete lengthy medical underwriting documents or undergo medical tests to get the cover, as you would if you took it out in your personal capacity,” says Van Wyk. That said, she cautions that the responsibility is on you to check that you have enough cover for your needs.
“If you need additional cover over and above the FCL, you will need to submit certain medical evidence, based on the policy terms and conditions. The extra cover above the FCL may be granted by the insurer at standard or increased rates.
“The extra cover may be declined based on the medical evidence provided. If you don’t provide additional evidence, the extra cover may not be granted and the benefit will be capped at the free cover limit,” she explains.
According to Van Wyk, being truthful when submitting your medical evidence for extra cover above the free cover limit is critical. “If the extra cover was granted and you didn’t properly disclose everything in the additional evidence, the claim for the extra cover may be declined in the event of death or disability and only the cover up to the FCL will be paid.”
However, she explains that if you were granted extra cover and weren’t aware of a medical condition at the time the extra cover was granted, it is not non-disclosure and you will be covered up to the amount of extra cover granted. “Similarly, if you contract a condition after being granted the extra cover, it is not non-disclosure and you will still be covered up to the amount of extra cover granted.”
Employee benefits can be a complex environment when it comes to the technical details around the benefits you have through your employer’s group scheme arrangement. “Talk to your employer, benefit counsellor or financial adviser to ensure that you are fully aware of, and understand, the details of your benefits so that if and when you or your loved ones have to claim it’s plain sailing,” concludes Van Wyk.
Momentum Corporate is the division of MMI Group Limited within the JSE-listed financial services group MMI Holdings, that engages with large and medium sized businesses to assist them and their employees on their journey to success. Momentum Corporate offers a holistic range of employee benefit solutions such as Retirement and Insurance benefits, Health Management, Workplace Risk Management, and Business Solutions.