Continuation benefits: are they the life assurance industry’s best-kept secret?

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There is no need to be underwritten if you convert your group life cover into a policy in your own name

When you leave your employer you lose your group life cover. If you don’t get the same benefits from a new employer, it can leave a huge hole in essential cover you need to ensure you have an income if you are disabled or your family is provided for when you die.

You may think you do not need it because you are moving to a new employer that also offers group life cover. However, remember that most group life schemes offer you a standard amount of cover that may not be sufficient for your needs. He says the conversion option is mainly exercised by employees who are not in good health, as they know cover will either be declined or loaded if they have to apply for cover with full underwriting.

Schalk Malan, CEO of BrightRock, says if you are in poor health and therefore more likely to claim, the conversion option allows you to access cover you wouldn’t otherwise be able to get or would have to pay more for in the market. When you take out cover in your own name, the assurer will price your premiums in line with your risk profile determined by factors such as your income, your health, your smoker status and any hazardous activities in which you partake.

He says the continuation benefit is typically priced the same as the standard life policy, so it only costs the insurer to guarantee you cover, even if you are in poor health. This is a risk the assurer is exposed to anyway through the group product.

 

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