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Insurance is a very important part of every individual’s life. It is a protection against future mishaps and an assurance against accidents that may or may not happen in the future.

As a result of continuous development in the field and companies realizing the importance of providing more affordable schemes, group life insurance is one such scheme.

Though it is said that everything is done better with more people in a group, but group insurance is still something that is not understood and full advantage is taken of it. A problem which is commonly faced by mostly all the organizations is employee attrition for encountering which the human resource department keeps on evolving ways to retain employees. Some focus on the cultural activities, some on the atmosphere and facilities, some keeps on upgrading the infrastructure and many such ways are taken into account. An effective way which most of the life insurance companies offer is certainly group insurance.    

A group life insurance provides insurance to a large group of people, usually the employees of a company where the employer is the policyholder. Group life insurance provides a little less coverage than other life insurances because it is almost free by the employer for its employees. If the employee accepts the group life insurance, a small amount may be deducted from his or her paycheck, depending on the policy.

Group insurance is a plan that covers all employees or members under a single master policy. One needs to be a part of the group, in order to take a group life insurance policy. A group may consist of doctors, lawyers, members of cooperative banks, credit societies, etc.

The Groups Are Classified As

  •    Contributory Scheme: Where the employer and employees both pay a premium towards a group life insurance policy.
  •    Non-Contributory Scheme: Where the premium is paid by the nodal agency or employer wholly.

Some examples of eligible groups are:

  • Employer-Employee Group
  • Creditor-Debtor Groups
  • Professional Groups
  • Other miscellaneous groups

Features of The Group Life Insurance Policy

Introduced to provide affordable insurance schemes, group life insurance is a vast insurance policy. It covers various features that are made to ensure the affordability and efficiency of an insurance policy. Here are the top features of a group insurance policy:

  1. Covers a group of people: As the name suggests, a group insurance policy covers a group of people. The group life insurance policy works under the master contract policy. A large number of people can be covered under a single policy. The insurers do not have to go through the long process of form filling. The employer is the applicant and the master policyholder. He/she is the one who chooses the plan and completes all the formalities of the group life insurance.
  1. Freedom of the insured: Not bounding those insured to the policy is the most amazing benefit of group life insurance policy. Any time, any insured can be added or removed by the applicant or the employer. There are no hard formalities to complete the process or no limit on changing the insured individuals.
  1. Affordable: We have to agree that affordability is the key feature of group life insurance.  Because of cost sharing between the employer and the employee, it is affordable. Only a tiny part of the employee's salary may be deducted for the premium of the group life insurance.
  1. A wide range of plans: According to the employer’s need and expectations, group life insurance offers a number of insurance policies. The two main policies are Group Term Life Coverage (the insurer can increase the premium annually) and Group Permanent Life Coverage which is further divided into various other categories. Permanent life coverage is less common than term life coverage.

Key Benefits of Group Life Insurance:

  • Yearly rewards: An employee is entitled to certain rewards and bonuses if (s)he has worked with the company. The reason for this that the employer can build up funds from the regular collection of premiums.
  • Financial security: Once the employee retires from the job (s)he receives the benefits of life insurance plan. This is extremely beneficial in case the employee wants to save for the retirement phase of his life.
  • Term policy: Being a very crucial part of the group insurance policy team policy is a must to keep in mind. In any condition, in the assured dies before the completion of the term plan, the sum assured amount is paid to the nominee of the assurer.
  • Professional fund management: Seasoned professionals are the one that handled the collected premium and the group insurance policy. Mismanagement of funds is not a thing to worry for the employer as it is in trusted hands.
  • Affordable premium payment: The premium amount of the assured may be decided as a small percentage of their salary. So, the employee doesn’t have to go out of their way to pay the premium as it deducted monthly from their paycheck.

How Group Life Insurance Works

Providing financial security to the employees is the main objective of any group insurance policy. This implies that the employees feel secure and have financial stability when they retire from the company. The employer takes care of the group life insurance policy and (s)he is the only applicant of the policy.  

As a premium of the policy, the employee has to pay a small amount of his or her monthly income. The employer might bear the entire expenses from his own pockets or the amount may be collected by the employer for the time the employee works for the company. In case the employee leaves the job at the end of the term or case. The amount is paid to the nominee of the employee in case of an unfortunate demise. This assures that the premium is paid to the trusted person and the employee and his family can have financial support after his or her retirement.

The Importance of Group Life Insurance

As established, group life insurance is a very beneficial policy for the employees of the company. Other than this, it also gives the employer many benefits as:

  • Increased productivity: A group life insurance ensures that the employee gets all the benefits from his or her job and thus, increases employee productivity, as it ensures financial security to the employee.
  • Assured retirement: The group life insurance gives the employees this financial coverage, once they successfully finish their working tenure, as they need financial stability after he or she retires from the job.  
  • Attract talent: The financial security provided by the group life insurance makes sure that the employees are happy in their workplace. This helps the employer attract better workforce and hire more talent.
  • Avail tax benefits: The employer can get eased up on taxes due to the group life insurance plan. This is because the premium collected for the group life insurance is not taken as company profit but as a business expense.

What a Group Life Insurance Policy Covers

Group life insurance is further divided into many schemes, as mentioned before. The coverage depends on the kind of policy that the employer entails, such as:

  • Group term life insurance: In case of untimely death, the nominee of the employee will be paid a lump sum amount. In addition to this, the employee gets regular life coverage benefits.
  • Group gratuity plan: Under this plan, if the employee retires or resigns after five years of working in the company, the employer has to pay gratuity to the employee.
  • Investment-linked insurance plan: Investment benefits other than the life coverage is offered by the investment-linked insurance plan. Through active market participation through the defined investment funds, the employee gets market linked investment returns.
  • Group mortgage redemption assurance scheme: This policy adds insurance security to the employees that have availed for a loan. It also provides life coverage benefits.
  • The group leaves encashment benefits: Under the plan, the employer has to pay to leave encashment to the employee in addition to the life coverage scheme. This is a bit similar to the Group Gratuity Plan.

You can also read:- Whole Life Insurance: Everything You Need to Know

What a Group Life Insurance Policy Doesn’t Cover

Along, with a large number of benefits that a group life insurance covers, which we have already discussed, there are scenarios where the group life insurance fails to provide cover. Here are some such cases:

  • It might not be enough: If one has a low income and (s)he is not able to invest in personal life coverage, a group life insurance is an affordable way to get life coverage. But those who are hoping that it would be enough are not absolutely correct, it might be a mistake. Group insurance is not much and may not be enough to spend a comfortable retirement.
  • Job uncertainty of the employee: Especially in the private sector, most people tend to change jobs several times until they reach the age of retirement. This result that the life coverage plan keeps changing and there is a high possibility that your next job may not cover the group life insurance. So, it is not a very efficient method of investment.
  • No control over the policy by the employee: The employer is in charge and the sole controller of the policy. The life insurance offered by the company may not be enough or might not cater to your needs. Your expectations from the policy solely depend on you and you’ll have to get insured separately.

Process to Claim a Group Insurance Policy

Usually, a claim has to be availed in case of an unfortunate demise of their employee or we can say the policyholder. Under situations like this, the nominee has to submit the following documents:

  • The claim form
  • Certificate of insurance
  • Original death certificate
  • Current address proof of the claimant
  • Photo ID proof
  • Bank passbook or a canceled check

The documents are checked and assessed by the employer and the claimant is given a date to clear the expenses. Once the documents are successfully checked and verified, the claimant is handed back the original documents and the claim is processed as per the set guidelines.

If You Summarise

The group insurance policy offers the best benefits to group members. In addition to the risk to life, gratuity benefits are also offered by comprehensive insurance plans. Employees are provided many benefits under a group life insurance plan. However, even though there are many benefits with a group life insurance plan, you should consider it as a supplementary plan and most of your requirements should be covered by an individual plan as individual plans will cover you even after you cease to be a member of the organization. The individual plan offers many benefits and it is possible to cover your spouse, parents, and children as well.

FAQs

  •    What does a group life insurance policy mean?

A group life insurance policy is collective life insurance that includes a large number of people as members.

  •    Can a group life insurance can be cashed out?

One cannot cash out a group life insurance policy until the completion of the defined situation like retirement or completion of five years in service.

  •    What are the key features of a group life insurance policy?

The key features of the group life insurance policy are:

  1. Single Policy for a large no. of people
  2. Affordability
  3. A wide range of plans
  4. Freedom of insured
  • What are the top group life insurance providers in India?

Popular group life insurance providers in India are:

  1. Bajaj Allianz Term Insurance
  2. Aegon Life Term Insurance
  3. Birla Sun Life Term Insurance
  4. HDFC Life Term Insurance
  5. ICICI Prudential Term Insurance
  •    What cash value does a group life insurance have?

A group life insurance has a cash value depending upon the type of group life insurance policy taken by the employer.

Naval Goel is the founder of PolicyX.com. He is an Associate Member of the Indian Institute of Insurance`, Pune. He has been authorized by IRDA to act as a Principal Officer of PolicyX.com Insurance Web Aggregator.
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