Group Life Insurance all You Need to Know

Group Life Insurance Policy

Group Life Insurance is an excellent benefit offered to employees by their employers. Most of the times, a basic group coverage is offered which includes insured employee’s family members, especially spouse and children. However, many people fail to consider employers’ insurance coverage as a part of their financial portfolio.

Why Buy This Plan?

This plan takes care of your utmost concerns about security and safety of your family. In the event of unfortunate demise of a group member, this plan ensures financial assistance to his/her family. Here, a single contract covers an entire group.

This Plan is designed for-

  • Employer-employee groups
  • Nonemployer-employee groups
  • Banks
  • Professional groups
  • Non-banking financial institutions
  • Microfinance institutions

Features of Group Life Insurance Plans

Group life insurance policies have lucrative features, which make them an ideal choice to be included in employees’ benefits package. A few of the many features are listed below:

  • It is a flexible policy. Members can be added at any time.
  • In the event of the accidental demise of a member, a pre-decided sum is offered to the nominee
  • Add-on covers are available to assure maximum policy coverage for critical illness, accidental deaths or disability
  • The application process is hassle-free
  • These policies are cheaper than an individual policy
  • Maximum members are included under a single policy with a single premium
  • Fatal diseases are covered as a built-in advantage
  • The employees can enjoy policy benefits as much as possible, provided a healthy rapport is being maintained by the employer.

Advantages of Group Life Insurance Schemes: From Employers’ Point of View

Group life insurance plans are as beneficial to employers as they appear to the employees. Some benefits are:

  • These plans are more economical than the individual plans. If an employer goes to buy individual plans for each of the employees, it will cost a bomb. Instead, grouping them under a single policy with a single premium is quite convenient and cheap at the same time.
  • Some life insurance plans offer both life insurance coverage and gratuity benefit.
  • Under a group life insurance, the employers can easily fund their gratuity liability. These gratuity funds are built to fulfill the gratuity payments, decreasing the load on the employer.
  • Returns on the clients’ funds depend on the fund performance
  • One can expect better returns from the funds that perform well which as a result, decreases the expense to the employer.

Advantages of Group Life Insurance Schemes: From Employees’ Point of View

The employees can be benefited with below advantages:

  • Financial assistance is assured to employees. The benefits are also extended to their family members in eventualities such as accidental demise, critical illness etc.
  • These plans are flexible and don’t require a pre-medical test at the time of buying a plan. This is in contrast to an individual plan.
  • The premium is paid by the employers and every employee is equally entitled to the benefits.
  • The policy members can enjoy death benefits which are exempted from tax under Section 10D of Income-tax Act.
  • Easy application process with liberal documentation.
  • These plans can be customized as per the needs of the employees.
  • Provides financial security to the family in the sudden death of the insured
  • Employees’ financial interest is protected

Group Life Insurance – the Premium Cost

Group insurance policies are less expensive while you are young. It is because when you enroll at an older age, you are required to undergo a guarantee. Since all the members of the policy are covered, the premium is decided on the basis of the pool of employees. No medical test is required while deciding the premium. With some of the insurers, the insurance rate automatically goes up with age. However, the increase in premium rate will be documented under the fine print of the policy.

Portability of Coverage

Since a group life insurance policy is linked to your current employment, the policy coverage automatically ceases once you leave the organisation. However, some insurers offer to continue with the plan by converting it to an individual term insurance policy. The conditions may vary insurer to insurer and could require underwriting. Moreover, you may avail the policy but it can be expensive in terms of premium. Consequently, possibilities are high that policies available are not that competitive in terms of the offered features and benefits.

Just for Your Knowledge

As you already know that, the group life insurance terminates at the moment your tenure with the company ends. This poses a threat if you have health issues and if your new insurer doesn’t cover you or offers different benefits under their group plan. To maintain the same benefits, you will be asked to switch the plan to a permanent individual policy or could be left with no policy. That way you’ll be stuck between a rock and a hard place.

Group plans become expensive as you grow older. When you are young and healthy, you can avail a 20-30 year term insurance at a lower cumulative price. Moreover, when you own an individual plan, it ensures that you’ll never be left with without coverage or be forced to purchase a more expensive policy at a later date. However, whenever you buy a standalone policy, consider the plans with a conversion option.

Final Word!

Pros and cons of Group Life insurance are nearly equal. The best way to deal with the cons is to understand your policy document thoroughly. If you are unable to purchase one by yourself, the group life insurance offered by your employer can come in handy during a financial crisis. However, before signing on the dotted line, consider the terms and conditions of the policy and ensure you.