Is Employer-Provided Life Insurance Enough? 3 Limitations You Need To Know

What is Employee Group Insurance?

Employee group insurance is a policy purchased by an employer that provides coverage to a pool of employees under a master contract. This is one of the key perks employees receive when they join a company. The scope of coverage typically includes:

  • Life Insurance: Provides a death benefit to the employee’s beneficiaries.
  • Critical Illness Protection: Offers a lump sum payout upon diagnosis of a specified critical illness.
  • Hospitalisation and Surgical Coverage: This covers the cost of hospital stays, surgeries, and related medical expenses.
  • Outpatient Treatment: Includes visits to general practitioners (GPs) and dental care.
  • Personal Accident Insurance: Provides benefits in the event of accidental injury or death.
  • Disability Income Options: Some plans may offer the option to opt into disability income programmes, providing financial support if the employee becomes unable to work due to disability.

 

These group insurance benefits can seem like a comprehensive package, potentially making it appear unnecessary to purchase additional personal insurance plans.

However, while group insurance can meet many protection needs, there are some important limitations to consider. This article will explore these limitations and explain why having your own personal insurance plans is still advisable.

 

Extra Benefits Offered by Group Employee Insurance

Group employee insurance offers several unique advantages:

  1. Guaranteed Issuance: Coverage is often guaranteed without the need for medical underwriting if the sum assured is below a certain threshold. This means that employees can obtain coverage regardless of their health status.
  2. Outpatient and Dental Benefits: These benefits are typically included, and are rarely offered in personal insurance plans.
  3. Wider Hospital and Surgical Coverage: Group plans can include coverage for treatments like inpatient care, daily ward charges, and other medical expenses. Additionally, they often offer coverage not typically found in individual plans, such as inpatient and outpatient mental health treatment, as well as neonatal benefits for mothers.

 

Limitations of Relying Solely on Group Insurance

Despite the appealing benefits, there are three significant limitations to relying solely on employer-provided insurance:

  1. Non-Portability: Your coverage is tied to your employment. If you leave the company, whether voluntarily or involuntarily, you lose your insurance protection. This can leave you uninsured during job transitions or if you decide to become self-employed.
  2. Limited Coverage Amount: Group insurance plans typically offer a standard benefit amount for all employees, with limited options to increase coverage. Any adjustments usually come at an additional cost and may not fully meet your personal protection needs. The inflexibility in tailoring the coverage to fit individual needs is a significant drawback.
  3. Cancellation Risk: Insurance companies can terminate the group policy by providing the employer with a notice, typically 31 days in advance. This means that if the employer decides to change providers or discontinue the benefit, employees could lose their coverage unexpectedly.

 

Why You Should Still Buy Your Own Insurance Plans

Given these limitations, here are key reasons to purchase your own insurance policy:

  1. Secure Your Insurability: By buying your own policy, you can lock in your insurance rates early, making it cheaper in the long run. If you lose your group benefits, you will still have your personal insurance coverage, ensuring continuous protection.
  2. Personalised Coverage: A trusted adviser can analyse your financial and protection needs, ensuring you get sufficient coverage while keeping costs low. Group insurance does not account for individual circumstances, making personalised plans more suitable for comprehensive protection.
  3. Dedicated Service: Having your own insurance policy means having an adviser who can service you and assist you with claims and administrative tasks. In a crisis, a strong advisory team can guide you through the claims process and advise on necessary procedures, providing peace of mind and support during challenging times.

 

Conclusion

While employer-provided group insurance offers valuable benefits and convenience, it should not be your sole source of coverage. The non-portability, limited customisation, and cancellation risks associated with group insurance highlight the importance of having your own personal insurance plans.

By securing individual policies, you ensure continuous, tailored, and reliable protection to meet your long-term needs. Investing in your own insurance plan provides the security and flexibility necessary to navigate life’s uncertainties with confidence.

Do reach out to us for a complimentary InsureWell Assessment to find out if you are adequately covered with your existing insurance or overpaying for inadequate coverage. We promise to tell you if you have enough insurance and if that is the case, you need not purchase any insurance from us.

This is an original article written by David Law, Insurance Specialist at Havend.


 

At Havend, if we are found to have oversold you, we have put in place a Money Back Guarantee (MBG) scheme, so you can trust that we will always prioritise your interests first. Unprecedented in Singapore, learn more about our Money Back Guarantee scheme here.

 


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