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Employee life insurance vs. personal life insurance

7 June 2007
2 minute read

1life generic blog

So you bagged your dream job and besides from scoring a car, cellphone and entertainment allowance, life insurance has been included in your package too. Wonderful! Now you can just sit back, relax and let your new, generous company handle all the policy administration, right? Wrong!

According to Lenerd Louw, CEO of 1Lifedirect, South Africa's first fully direct life insurer, there are a number of negative aspects when it comes to group scheme life insurance policies offered by companies that consumers need to be aware of.

"For one thing," says Louw, "work policies are often based on an overall profile of the people you work with, many of whom may be smokers, or suffer from obesity, diabetes, high blood pressure or heart disease. This means that employees who are in good health will be put in the same risk profile as the less healthy employees and will receive significantly reduced cover compared to what they would if they had personal life insurance policy."

The second major consideration that you need to take into account is whether or not the amount of cover you are getting through your company is actually enough to sustain your family should anything unforeseen happen to you.

"As a rule of thumb, your cover should be equal to between six and ten times your annual gross income, in order to ensure that you are sufficiently covered," says Louw.

If your life cover doesn't extend that far, there is a strong possibility that in the event of your death, there won't be enough funds to take care of your family and cover any debts you may have incurred. Your family will be put under financial strain as a result. Keep in mind that the funeral alone can cost a family as much as R30 000 and expenses such as this need to be taken into account when determining how much life insurance cover your company is offering you.

"A lot of companies offer the bare minimum when it comes to life insurance, and as such, employee life insurance may be inadequate for your needs. It is definitely worth enquiring about upgrading the basic life insurance policy that your company is offering you or investigate your own, personal life insurance solution, which, contrary to popular belief, is not at all difficult," says Louw.

"There's also a chance that the policy will expire if you leave the company. My advice is that consumers do their research before taking the easy way out. Life insurance is a necessity and something that you cannot 'cut corners' on," concludes Louw.

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