Wealth Nov 11, 2020

What is group insurance?

6 min read

What is group insurance?
What is group insurance?
A group policy is an insurance policy which offers coverage for a group of people, such as those working for a large organisation. Certain industry bodies, employers and superannuation funds also offer group insurance policies. Many Australians have access to these via their superannuation funds as well.


But what is it and is the cover sufficient?

A group policy is designed to offer a base level of cover for a range of people. This can include cover for life insurance, total and permanent disablement (TPD) or income protection. Many of these group policies offer a limited range of benefits, caps on how much cover you can take without having your application being underwritten (but we’ll circle back to this shortly).

If you’re like most who have been allocated some default cover levels within their super fund, these policies are not tailored for the individual. Often the cover may not be sufficient – either the default amount of cover is too low, or the benefits are not adequate. It should also be noted that some important covers are not legally available through your super fund.

All that said, for many people some cover may be better than no cover at all, but it is important to review how much cover is available, what it covers you for and consider whether this will be enough for your individual circumstances.


What is cover without underwriting?

Underwriting is another word for the financial, occupational, medical and lifestyle assessment the insurance company conducts before offering a tailored insurance coverage. Those who have existing medical conditions or participate in risky lifestyle choices may have to pay a higher premium for the same cover or have those activities/illnesses excluded on the policy. This means they may not be covered for certain identified risk factors.

When cover is offered without underwriting and you have a medical condition, you need to understand if the policy imposes a pre-existing medical condition exclusion, which means you may not be able to claim for pre-existing medical conditions.


Can the cover be increased?

In some instances, group insurance policies will let you adjust the level of cover you have in line with certain life events such as the birth of a child or marriage.

Ben* has a heart condition which he was born with. Due to this condition an insurance application would be scrutinised, and he would likely have to pay extra to be covered for this heart condition. Through his employer’s group insurance policy Ben is provided with limited insurance cover without underwriting and without a pre-existing condition exclusion.

After upgrading their family home recently and increasing his debt, he found he needed to increase his level of cover and sought to do so through his employer plan. He discovered he would have been able to increase his cover by 20% after the birth of each child without underwriting. However, he learned that this needed to have been applied within 3 months of the child being born.

Had Ben been fully aware of the options and benefits available he could have taken better advantage of his employer’s insurance policy. We are going through the process of helping Ben increase his cover through other means, but it really flagged to us the importance of understanding what’s available and when.


Key questions to ask your Group Insurance provider

  • How much am I covered for?
  • Can I increase my cover at any time?
  • Can I continue the policy in my own name if I leave my employer?
  • Are there any pre-existing medical condition exclusions on the policy?
  • Can I get a copy of the PDS?

If you’re not sure what you’re covered for or are feeling confused after looking at the PDS, then get in touch. The Entourage Wealth team is well versed in understanding what those T&C’s actually mean in real world settings and can guide you through.