Who pays for employees' group life and disability benefits?

Key takeaways

  • If group life benefits are provided through your retirement fund, the fund will pay the premiums and will cover this cost from the contributions paid by your employer, the members, or both.
  • Standalone group life schemes offered by an employer are paid for by your employer, but will be a fringe benefit added to your salary for tax purposes.
  • The costs are generally cheaper than individual cover because they are based on the spread of ages across the group. The group usually does not age as young employees join all the time. Administration and broker commissions are lower than on individual policies and the cover is compulsory for the group.

Group life benefits may be paid for in a number of ways. If the benefits are offered through your retirement fund, the fund will pay the premiums, but the cost of the benefits may be deducted from either your employer’s contributions or your contributions or both.

The most popular option is for the employer to make a higher contribution to the fund and for the cost of the group life and disability benefits to be deducted from that contribution.

Premiums paid in this way are regarded as a fringe benefit, but you can claim a tax deduction for contributions paid to your fund that effectively equalises the fringe benefit, as long as the total contributions to your retirement fund are within the maximum tax-deductible limit.

If the benefits are offered through an employer scheme that is not part of your retirement fund, your employer will pay the premiums and the benefit will be regarded as a fringe benefit that is added to your salary for tax purposes.

What do group life benefits cost?

The costs vary across funds and are typically a percentage of employees’ salaries.

If the contributions are paid through your fund, ask what the cost is so you know what percentage of the total contributions to your retirement fund is being paid into the fund on your behalf.


If your group life and disability cover is being paid by your employer, and the company gets into financial difficulty, check that the company is continuing to pay the group life and disability cover premiums.  

If employers fail to pay contributions to your fund, the trustees should be alerted and should alert you, unless they believe the employer will rectify the failure to pay the contributions and life and disability benefit premiums.  

Generally, the cost of the cover will be lower for you than taking out cover in your own name. The reasons for this are:

The premiums are based on an average premium rate per rand of cover for the group. This means younger employees cross-subsidise the costs of those who are older, the costs for those in higher risk jobs are subsidised by those in lower risk jobs and the costs of the sick are subsidised by the healthy.

Factors such as your education level, your health, your smoker status and any hazardous activities in which you partake are not taken into account, although cover for death or disability arising from certain activities, such as high-risk sports, may be excluded.

In some cases, young, healthy, highly qualified individuals would be able to get cheaper cover in their own name, but for many the costs are lower.

The cover is compulsory for all in the employer group which means the risk is spread across a broad, diverse group.

The costs for the insurer of taking on a big group are lower than they are for taking on an individual policy.