RAF Disability Cap Payout Threatens Employee Benefits Cover

With Road Accident Funds (RAF) payouts capped at a salary of R160 000 per annum, companies need to reconsider the effectiveness of their employee benefits insurance schemes.

In the past attorneys secured settlements of up to R15 million from the RAF. Following recent amendments, these same cases would most likely only secure a R1.5 million settlement.

As such, “many companies and individuals will find that they do not have sufficient disability cover under their employee benefit disability schemes “ warns David Honeyman, Product Manager at Alexander Forbes Cre8 (Pty) Ltd.

Under most retirement fund disability policies, the benefit is only payable should the employee be unable to return to their own occupation - or any other occupation for which they are suited by education or training.

For example, “if you have an administration job and you become paralysed but can still work from a wheelchair you will most likely not receive a payout from your retirement fund disability policy - despite the substantial costs associated with your disability,” says Honeyman.

For example, “consider the cost of modifying your house to accommodate a wheelchair - or the cost of modifying your motor vehicle. There will also be specialist medical bills not paid in full by your medical aid. And the list goes on …” says Honeyman.

Also, not many people think about insuring their dependant children for disabling injuries. Yet a disabled child will have a massive financial impact on any family.

“Usually one of the parents has to stop working to look after the child - or hire medical attendants 24 hours a day. None of this is cheap” adds Honeyman.

If the child is disabled at ten years old, the reality is that the child could live with that disability for another 60 to 70 years. As the RAF and most company disability covers are currently structured, the cost of caring for this child would have to be borne by the family.

As such, Honeyman suggests that employers consider “Permanent Disability cover under a Personal Accident policy as this provides employees with a disability benefit that is assessed on bodily injury - not on an employees’ ability to perform his or her occupation.”

This way around, if you are paralysed, you will get the full benefit of your scheme – even if you are able to return to your occupation.

Honeyman concludes that, “to meet this need Alexander Forbes Cre8 (Pty) has developed a cover that ensures that funds will be available for families to maintain their lifestyles regardless of how or who disability strikes.”