For many, understanding the ins and outs of various insurance solutions can feel overwhelming and even confusing at times. It is important to know what solutions exist, how they work and what works for you. Here, we look at one solution, Group Life Assurance, and unpack what it offers as well as how it works.
Group Life Assurance is a type of insurance policy in which a single contract covers an entire group of people in an organisation. The policy owner is an employer or an entity, and the policy covers the employees or members of the group. In the event of any type of accident or illness that causes permanent disability, or even death, this contract would cover every member affected. All individuals are covered within the same benefit 24 hours a day, whether in the line of duty or at their respective homes.
When a company wants to insure its employees, it sends its employee data through their broker, who then submits the data to various life insurance companies for quotes. The company’s quote is determined by various factors. This includes, but is not limited to, size of the selected scheme, profile of the employees in-terms of gender, the type of occupation/job description, age and the company’s claim history experience.
Some may argue that the employee has little to no control over their individual coverage and that the cover does not continue or follow the employee if they decide to leave their job. However, Botswana Life does offer a conversion option where one can pay a calculate premium for the specific cover with no additional medical underwriting required. Group Life Assurance encourages employee retention because they feel taken care of and most importantly it covers employees who otherwise would not be able to afford individual life insurance policies. Grouping individuals together allows insurance companies to give more competitive pricing. It allows higher risk individuals to be given life insurance coverage, awarding insurance to all Batswana. Group Life normally covers all individuals up to the age of 65 even though the cover maybe extended to individuals up to the age of 75 under special requests.
How does contract termination occur? Just like any other policy, there are rules and regulations that have to be observed and carried out. When premiums are not paid the contract can be terminated.
When a cover is restricted to a calculated cover (known as free cover limit), individuals who exceed this cover are requested to undergo medicals and if they do not, their cover will be restricted.
With that being said, what makes Group Life really stand out from other assurances?
It is important to note that Group Life and Credit Life are two different insurances with different purposes. Group Life covers groups of people in terms of death and disability, whereby their dependents benefit after their beneficiary passes away, whereas, Credit Life covers loans that individuals take from financial institutions such as mortgage, personal and car loans. When the individual dies or is permanently disabled, the insurance provider pays out the outstanding amount for the loan including the interest the loan would have accumulated.
Research as well as past cases in Botswana have shown that some companies find it more beneficial and cost-effective to get group life cover rather than the company paying out lumpsums to families. It is only ethical that an employer offers a contribution towards an employee’s family after they have passed on, and therefore it is imperative to narrate the need to further educate Batswana on Group Life Assurance benefits. Even though this policy has been taken up at a higher rate in other developing countries (such as South Africa), recent research has indicated that only 20% of organisations are enrolled with Group Life Assurance, making it a necessity to keep combining efforts and spreading awareness.
Group Life Assurance was developed to be able to ensure that every Motswana has some form of insurance, ultimately assisting with the National Agenda (Government strategy) and financial inclusion aspect. Local companies are therefore urged to continue creating solutions and advocating for financial literacy. Conclusively, it is imperative to get more information, seek expert advice, and make more informed decisions, one that looks at more than just price.
Article by: Mr. Joseph Kuaho, Head of Corporate, Botswana Life