By Karen Bongers, 10 October 2018
When getting a new job, many people simply sign on the dotted line. Often not enough attention is paid to the risk benefits part of the employment contract. However, if you do not have someone to give you guidance and advice, you may miss important details and as a result leave yourself vulnerable to being underinsured.
Karen Bongers, Product Actuary at Sanlam, says that people who receive risk benefits as part of their remuneration package should critically analyse their cover to determine whether they are adequately insured under the employer's scheme. "A regular conversation with a
financial planner is, in fact, critical if you want to ensure that you have sufficient benefits in place to protect your needs and those of your family."
Even if you are fortunate enough to receive group benefits, it may not be sufficient to provide adequate financial protection for you and your family's needs in the event of death, disability or critical illness. Bongers states that although group benefits add significant value, it is concerning when people that having group benefits is synonymous with being fully covered for risk needs.
"The group risk benefits packages offered by employers typically include life and disability insurance, the latter being in the form of lump sum and/or income protection, potentially also with some critical illness cover options. The amount paid out for lump sum benefits (be it for death, disability or critical illness) is usually a multiple of your annual salary. There may, however, be a large gap between the amount your family will receive and what your dependants will need, and you may need to consider topping up your cover with individual risk insurance," she says.
Bongers says it is advisable to review your risk cover whenever a major life event occurs, such as marriage or the birth of a child. "To keep it top of mind, however, monitor your benefits at least once a year. In this way you will ensure that the benefits remain up to date and continue to meet the needs of those who depend on you."
She says advice from a qualified financial planner is crucial to guarantee you have adequate cover for your family's needs. "Armed with the information you have received from your company's HR department, a financial planner will be able to conduct a comprehensive needs analysis and provide you with a holistic picture in terms of the current and future financial requirements for both you and your family," Bongers concludes.