If you’re fortunate enough to have employee group benefits, they’re probably something you don’t think about too often. And that’s natural – they’re the safety net you hope you’ll never need. But here’s the catch: when life takes an unexpected turn and you do need them, chances are you’ll be dealing with shock, grief, or stress. That’s not the moment you want to be figuring out the fine print.
The time to pay attention is now – while you can think clearly and ask the right questions. This is where financial advisers and employee benefits specialists play a crucial role in helping employees to understand exactly what they are covered for – and what the limitations might be if the worst were to happen.
At the recent 2025 Employee Benefits and Health Masterclass hosted by the Financial Planning Institute of Southern Africa (FPI), Certified Financial Planner® and employee benefits specialist Johann Peens unpacked the often-overlooked world of group risk benefits and highlighted some of the common pitfalls that employees (and employers) face.
Group risk benefits typically include life cover, disability cover, funeral benefits, dread disease (or “critical illness”) benefits, and sometimes even spouse’s cover.
Because these benefits are offered to a group of employees, the risks are pooled together – which means better pricing, broader cover, and fewer medical requirements than if you were to try to secure the same benefits on your own. This is why group schemes can offer valuable protection at scale.
One area that often causes confusion is the distinction between approved and unapproved benefits. Peens explained that in South Africa this boils down to how the benefit is structured and taxed:
- Approved benefits are provided through a registered retirement fund (such as a pension or provident fund), governed by the Pension Funds Act. Contributions usually come with tax advantages, but payouts are taxed according to retirement fund rules. Examples include life or disability cover linked to your retirement fund.
- Unapproved benefits are provided outside of a retirement fund, usually via an insurance policy. These fall under the Long-term Insurance Act. Employer-paid premiums may be taxed as a fringe benefit, but the good news is that payouts to beneficiaries are usually tax-free.
Peens also warned of recurring mistakes employees and employers make when it comes to group benefits. Among them:
- Not submitting claims on time, which can lead to repudiation (a denied claim).
- Misunderstanding waiting periods and not having clear employer policies in place.
- Overlooking continuation or conversion options when leaving a job.
- Failing to align the insurance policy with the retirement fund’s rules.
- Poor communication with members, leaving employees in the dark about what they actually have.
Don’t delay claim notifications
One of the biggest mistakes employees and employers make is failing to notify the insurer of a potential claim in time. This can result in the claim being repudiated – in other words, rejected.
According to Peens, it doesn’t have to be complicated: “It can be as simple as sending a quick email to the insurer to say, ‘We may have a disability claim on file.’”
He notes that all the paperwork is not required upfront – the key is simply to notify the insurer, with supporting documents provided later if needed.
Most policies require claims to be submitted within three to six months, but it is critical to check the exact timelines on your policy. Missing this window creates unnecessary risk. Even if the claim ultimately doesn’t go ahead, letting the insurer know early means the file can be closed without consequence.
Employers also have an important role to play. HR teams should be trained to understand the claims process and timelines, so they can assist members in notifying insurers promptly. This not only reduces the risk of a denied claim but also makes the entire process smoother for employees.
Know your waiting periods
Another common pitfall is not understanding how waiting periods work – and this can create serious problems when an employee becomes disabled.
A waiting period is the time that must pass before a disability income benefit kicks in, and it is usually about three months on group benefits (although it can be shorter or longer, depending on the policy). During this period, the member still needs to cover their living costs – and this is where confusion often sets in.
Peens explained that many employees – and sometimes even employers – do not fully grasp how waiting periods apply. This is why it is vital for every company to have a disability management policy in place. Such a policy sets out clearly what happens during the waiting period and how employees will be supported. Without it, members can be left exposed.
Options to bridge the gap might include:
- Salary continuation by the employer, although this carries a risk if the claim is later rejected.
- Using accrued leave, such as sick leave, annual leave, or family responsibility leave.
- Temporary disability cover, if provided by the fund or insurer, which pays a short-term benefit until the income protection benefit begins.
- Medical scheme sick benefit integration, which can help to cover medical expenses but does not replace income protection.
The key, Peens emphasised, is communication and clarity. Employees should know exactly how waiting periods will be handled, and HR or trustees must be able to explain the process. That way, when a member faces disability, they are not blindsided but supported.
Don’t overlook continuation and conversion options
Another area that employees – and sometimes employers – often ignore is continuation and conversion options. These may sound technical, but they can make a huge difference to financial security, particularly when someone becomes disabled or leaves employment.
A continuation option allows an employee to keep certain benefits, such as life cover or death benefits, even while on disability income. This means that if the member later passes away from the illness or condition that caused the disability, their family is not left destitute. Instead, the insurer still pays out the agreed multiple of salary or lump-sum benefit, providing essential financial support when it is most needed.
A conversion option gives a member the ability to convert their group cover into an individual policy when leaving the employer. This can apply to disability or death benefits. The big advantage? It usually comes with limited medical underwriting – often only an HIV test – making it far easier and cheaper to secure cover than trying to take out a new policy later in life.
But here’s the catch: conversion options are time-sensitive. Employees generally have only 30 to 60 days after leaving employment to exercise the option. Miss that window, and the opportunity is gone. Peens said many people only realise they needed the cover years later, when it is either too late or prohibitively expensive.
He emphasised that employers and HR teams should have open conversations with employees about these options, noting that it is not only a question of cost but also of suitability. The key, Peens added, is to start the discussion early so that members understand the consequences of not acting in time.
Align policy and fund rules
Another pitfall Peens highlighted is the misalignment between policy and fund rules. Simply put, the insurance policy that provides the cover and the retirement fund’s rules must say the same thing.
If the two are out of step – for example, if the policy allows for a certain benefit but the fund’s rules do not reflect it – claims can be delayed or even denied. This creates unnecessary confusion and risk for members at the very moment they need certainty and support.
The solution is straightforward: employers, trustees, and advisers must ensure that fund rules and policy terms are always aligned.
Talk to your members
Finally, Peens said one of the biggest challenges in employee benefits is poor communication with members. Often, employees either do not receive the right information, or they ignore it when it arrives in their inbox. The result? They do not fully understand their benefits or how to use them when the time comes.
The best way to overcome this, he said, is through interactive member sessions. These give employees the chance to ask questions, clarify uncertainties, and understand exactly what cover they have. It is also where hidden issues often come to light and can be fixed before they become problems.
The bottom line: Employee benefits may not be the most exciting part of your payslip, but they are one of the most important. Avoiding the common pitfalls ensures that when life throws the unexpected your way, your safety net is strong enough to catch you and your family.
