Do your benefits statements reflect your family’s plan?

Understand your benefit statement

Have you studied your benefit statement to see if it reflects your family’s needs? Just like a picture is worth a thousand words, so is understanding your employer group life benefit statement! Whilst it seems that life is becoming even busier, and that there are literally not enough hours in the day, I implore you to make time to study your benefit statement, understand it, and make sure that it reflects your family’s plan. The power is in your hands. 

What to look out for

When studying your benefit statement, there are a few key aspects to pay special attention to, which are unpacked below.

Fund rules

The fund rules confirm the contribution parameters, in other words the amounts you can contribute to the fund. It is important to keep in mind that, depending on your specific situation, it may not make sense to contribute the maximum amount. For example, it may make more sense to contribute a portion through a personal retirement vehicle for increased diversification and tax relief. The saying ‘never have all your eggs in one basket’ applies to group benefits too!

Underlying fund options

Understand what types of funds are available to you. In addition, understand when you can switch between funds and what that process entails.

Beneficiaries

Make sure that you have updated your beneficiaries. Remember that if you pass away and have not nominated beneficiaries, the proceeds of retirement funds will be paid to your financial dependents, but group life benefits will be paid to your estate. For this reason, it is crucial to always list your beneficiaries and remember to amend them as necessary when there are changes in your life such as if your nominated beneficiaries pass away or if there are new beneficiaries you wish to nominate (for example if you get married or have children). No one wants their ex-spouse to benefit because they simply forgot to update a document! It is also very important to inform your beneficiaries that they have been noted as beneficiaries of your benefits.

Risk benefits

Understand what cover you have in place and how it changes on an annual basis.

Life cover, occupational disability, income protection and critical illness (also known as dread disease)

Take time to understand what each cover amount is and how it changes annually. Employee benefits may change on an annual basis (e.g., life cover is normally a multiple of your pensionable salary and will often taper as you get older). Be aware of any changes and, if you earn a commission, ensure that it is updated in line with your latest annual income.

Guaranteed insurability

Understand whether you can move your benefits over as personal cover without underwriting. If you are potentially leaving your current employer, this option should always be considered. This process needs to happen before you leave the employment of your employer – once you have left it is too late.

Income protection

Take note of the waiting periods and the period for which the payments will last. Don’t assume that if you become disabled, you will continue to receive payments until retirement. Many income protection plans only pay for 24 months and then you are on your own. You may require personal cover to fill that gap. 

If you have income protection via your employer and have personal income protection, make sure that you are not over-insured! Insurance companies will take aggregation into consideration, so you won’t necessarily be paid the full amount if you are over-insured.

Consult a financial adviser

Just like you will go to a doctor for a professional opinion on your health, seek professional financial advice from a qualified financial adviser to assist you with structuring your financial affairs in a way that addresses your unique set of family goals.