How Does Group Term Life Insurance Work?

Employees are the most valuable assets of an organization. As an employer, one may feel responsible for their well-being and the security of their respective families. In case an employee dies a natural or accidental death, it affects not only his family but is unpleasant for the organization and his colleagues as well.

The best part that an employer can play in such a situation is to guarantee financial security to his beneficiaries in some manner. Even the small help, in such cases, can mean a lot for the dependents of the late employee. To ensure financial security for their employees’ families, in such unexpected circumstances, most employers avail a Group Term Life Insurance policy.

What is a Group Term Life insurance cover?

As the name suggests, this policy can be availed for a group of people which may not be necessarily employer-employee groups. Firms with the required minimum strength can avail the group term life policy. It covers all the employees under the single sum assured and the part of each employee is fixed on various factors like his designation, marital status, the number of family members, etc.

Who pays the premium for the policy?

The employer generally pays the premium of the group term life insurance policy. However, there is an option of making contributions to the employees which they can easily offer to make through the deducted amount from the paychecks every month. The premium amounts are not fixed and depend on the size of the organization and the age of the individuals included in it. The members can be added or removed accordingly at any time of the year.

Policy Benefits: –Being cheaper than an individual policy, group term life insurance is the most preferred benefit that the employers choose to give the employees. On the one hand, for the employees it ensures financial security for their families in unfortunate circumstances, on the other hand; an employer can avail its advantages in the following manner:

  • The Gratuity liability towards each employee is easy to fund under the policy cover
  • In case the fund you chose performed well, it will prove to be more economical
  • Employers can also avail group term insurance policies along with gratuity benefits

How to Avail the Group Life Insurance?

To avail the group term life insurance policy certain steps, need to be followed. It is always better to be aware of the procedure to avail the policy including the claim settlement to engage in a hassle-free process.

Step 1: Decide the Sum Assured

  1. Your total sum assured for the plan will depend on the way you offer the cover to your employees.
  2. You can follow any one of the following methods, based on your organizational structure and objectives:

Flat cover for all the employees (suitable for small organizations, Start-ups, etc.)

Graded cover (suitable for large organizations with multiple hierarchies)

Salary Multiple (better suited for firms with varying compensations for same level employees)

  1. Accordingly, you may choose a lump sum amount as sum assured or link it to the salary or loan account of the employee.

Step 2: Selecting the Riders

  1. Riders are additional benefits that can be added to the term policy. For example, accidental benefit or critical illness cover.
  2. You may also opt to provide the option of settling car and home loans of the employees, through the life insurer if they lose their life.

Step 3: Premium Estimate

  1. Once you have finalized a sum assured and rider benefits, your insurance advisor can estimate a premium based on the industry, number of employees, and average age of the employees.
  2. The premium for availing only the base policy will be lower than the premium for life cover plus riders.

Step 4: Payment of the Premium

  1. After fixing the sum assured and the rider benefits, you need to complete the documentation and pay the premium of the policy.
  2. All employees are covered under it for the tenure of one year.
  3. The policy is renewable annually, your next premium will depend on the claim history in the first year and any addition or reduction in the number of employees to be covered.

Step 5: Issue of the Master Policy

  1. Submit the required documents and the application form, the insurer will verify the details, and the underwriting is done to assess the risk.
  2. The employer/group administrator is handed a master policy document if the premium estimate justifies the insurer’s risk. (If the risk estimate is higher additional premium may be demanded and vice versa)
  3. Read the policy document thoroughly including the rules guiding payment of premium, exclusions and claims procedure.

How to File a Claim Under Group Term Life Insurance?

In the case of death of an employee, the following requirements are to be fulfilled:

  • The claim form of the insurer
  • Certificate of insurance
  • Original Death Certificate issued by Local Authority OR Attested* copy of Death Certificate
  • Banker’s Certificate (Only for schemes where there is a cover for loans as well)
  • Current Address Proof of the claimant
  • Photo ID Proof of the claimant
  • Bank Pass Book / Bank Statement / Cancelled Cheque of the claimant
  • Submission of documents like the death certificate or the post-mortem report by the beneficiary of the insured.

Once all the assessment is made, a due date is provided till the claim will be settled. In most cases, the beneficiary of the insured employee can check the status of the claim settlement through a helpline number provided by the insurer. The claim is settled duly through the payment of the amount fixed under the scheme for the respective employee. The employer may inform the insurer to remove the employee from the group cover.

General Insurance advisor SecureNow assists you in these processes whether you are buying the policy or filing a claim. SecureNow offers 24×7 support in managing your group policies and helps in any query your employees may have in future.