We all know that insurance is a very important part of every individual’s life. Not only it is a protection against future mishaps, but an assurance against accidents that may or may not happen in the future. Due to continuous development in the insurance sector, the companies realized 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. These days, the common problem for employers to retain employees and reduce the numbers of attrition. For the same, the human resource department keeps inventing new ideas to reduce attrition cases. A few of them pay increase cultural activities, while a few focus on the environment and facilities, and many other ways are there. An effective way that most of the insurance companies offer is certainly group insurance.
Group life insurance offers coverage to a large group of people. It is highly used for the employees of a company where the employer is the policyholder. Because of its nominal free, group life insurance offers a little less coverage as compared to other plans. So in the case where the employee accepts the group life insurance, a small amount may be deducted from his or her paycheck, depending on the policy.
To avail the benefit of group insurance, one needs to be a part of the group, to take a group life insurance. The plan may be for any group, be it, doctors, lawyers, members of cooperative banks, credit societies, etc.
The Groups Are Classified As
- Contributory Scheme: Under the same, the company and employees both pay a premium to keep the plan active
- Non-Contributory Scheme: The premium is paid by the nodal agency or employer wholly.
Some examples of eligible groups are:
- Professional Groups
- Creditor-Debtor Groups
- Employer-Employee Group
- Other miscellaneous groups
Features of the Group Life Insurance Policy
Introduced to offer great insurance schemes at affordable prices, group life insurance comes out as the best option. It covers various features to make sure about the affordability and efficiency of a plan. Here are the top features of a group insurance policy:
- All people in a group are covered: As the name suggests, a group insurance policy covers a group of people. It works under the master contract policy, as a large number of people can be covered under a single policy. Under group insurance, insurers do not have to go through the long process of form filling, as the employer is the applicant and the master policyholder. Under this plan (s)he is the one who chooses the plan and completes all the formalities of the group life insurance.
- 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.
- 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. A very little part of the employee's salary may be deducted for the premium of the group life insurance.
- A wide range of plans: According to the employer’s needs and expectations, group life insurance offers several insurance policies. Group Term Life Coverage (the insurer can increase the premium annually) and Group Permanent Life Coverage which is further divided into various other categories are the two main policies available.
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 a life insurance plan. In case the employee wants to save for the retirement phase of his life, this is extremely beneficial.
- 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 ones 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: As a small part of the employee's salary. the premium amount of the assured is decided. Hence, 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 is the only applicant of the policy., so (s)he cares about the group life insurance 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. Moreover, it also provides the employer with many benefits as:
- Increased productivity: It is a group life insurance that makes sure that the employee is receiving all benefits from his or her job and hence, 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: To make sure that the employees are happy in their workplace, group insurance provides financial security. This leads to a better workforce for the employer and hires more talent.
- Avail tax benefits: Due to the group life insurance plan, the employer can get eased up on taxes. The reason being premium collected for the group life insurance is considered as a business expense, not as a company profit. What a Group Life Insurance Policy Covers
What a Group Life Insurance Policy Covers
Group life insurance is divided into many helpful schemes. However, the coverage depends on the type of policy. The different forms of policy are:
- Group term life insurance: In case of untimely death, the beneficiary will receive a lump sum amount. Additionally, the benefit of regular life coverage is also offered.
- Group gratuity plan: Under this plan, the employer has to pay gratuity to the employee, in case the employee retires or resigns after five years of working in the company.
- Investment-linked insurance plan: Investment benefits other than the life coverage is offered by the investment-linked insurance plan. Through active market participation, the employee gets market-linked investment returns, through the defined investment funds,
- Group mortgage redemption assurance scheme: To the employees that have availed for a loan, this policy adds insurance security. Additionally, it also offers 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. We can say that this plan 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 group life insurance covers, which we have already discussed, there are some points on which the group life insurance fails to provide cover. Here is a list of 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 correct, it might be a mistake. Surely, group insurance is not 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. Hence it is not considered a very efficient method of investment.
- No control over the policy by the employee: Under a group insurance policy, the employer is the whole controller of the policy. The life insurance offered by the company might not always cater to the insureds’ needs. The expectations from the policy solely depend upon a person to person and (s)he will have to get insured separately.
The 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. To claim a group insurance policy, 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
Once the documents are submitted, they have been verified and assessed by the employer and the claimant is given a date to clear the expenses. After which the claimant is handed back the original documents and the claim is processed as per the set guidelines, once the documents are successfully checked and verified.
If You Summarise
By all means, we can conclude that the group insurance policy is the best option available as it offers the best benefits to group members. Though the list is lengthy, but most important one is that its gratuity benefits are also offered by comprehensive insurance plans. But it is suggested that despite there are many benefits with a group life insurance plan, one should consider it as a supplementary plan and most of the requirements should be covered by an individual plan as individual plans will cover the person even after (s)he ceases to be a member of the organization. Because the individual plan offers many benefits and it is possible to cover the family as well.
- What does a group life insurance policy mean?
Collective life insurance that includes a large number of people as members is called as a group insurance policy.
- Can a group life insurance be cashed out?
No, 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 salient features of a group life insurance policy?
Here is a list of salient features of the group life insurance policy:
- A large number of people covered under a single plan
- Easy to afford
- A wide range of plans
- Freedom of insured
- What are the top group life insurance providers in India?
Popular group life insurance providers in India are:
- Bajaj Allianz Term Insurance
- Aegon Life Term Insurance
- Birla Sun Life Term Insurance
- HDFC Life Term Insurance
- ICICI Prudential Term Insurance
- What cash value does a group life insurance have?
Depending upon the type of group life insurance policy taken by the employer, yes a group life insurance has a cash value.