Maximise your employer-funded life cover

Maximizing employer-funded life cover can provide essential financial protection for both employees and employers. Many employees are unaware that they can voluntarily increase their group term life (GTL) cover, a process that involves paying additional premiums, often deducted from their salary, which results in lower premiums compared to individual term plans.

This enhanced coverage is available within a set limit, the free cover limit, and does not require a medical examination, saving time and administrative effort. However, it is crucial to understand that such voluntary enhancements typically cease upon the termination of employment, and the group plan may still be subject to GST, unlike individual plans.

Employers can offer additional riders with GTL plans to further customize the coverage. Riders can provide benefits such as critical illness payouts, terminal illness coverage, accidental death benefits, and permanent disability protections. While some companies offer these riders at lower limits, it is advisable for employees to request a comprehensive list of available riders from their human resources department to ensure they are not missing out on valuable coverage.

For employees who may move within or between organizations, an employer-employee term life insurance plan can offer a more stable solution. These individual insurance policies are paid for by the employer but are assigned to the employee, ensuring that the coverage remains consistent even if the employee changes jobs or locations. This type of plan is particularly beneficial for senior executives whose absence could significantly impact the organization.

While GTL is designed to protect the employee's family, keyman insurance serves a different purpose by safeguarding the company's continuity. Keyman insurance involves the employer purchasing a life insurance policy on a key employee whose loss would detrimentally affect the business, such as a chief executive officer or founder.

The premium is paid by the employer, and the beneficiary is the company. In the event of the key employee's death, the payout can support the company in various ways, including funding the purchase of shares from the employee’s estate or covering losses due to the disruption in business operations. This form of insurance can be vital for startups and mid-sized companies where the loss of a key individual could have severe financial repercussions.

Employers should consider GTL, voluntary enhancements, riders, employer-employee term life insurance, and keyman insurance as part of a comprehensive strategy for both employee and business continuity. These instruments collectively offer a more robust safety net compared to relying solely on the base GTL cover. HR teams should evaluate whether they are merely providing a superficial safety net or truly supporting their employees' financial well-being and the organization's long-term stability.