Most employers provide Group Insurance Plans to their employees, especially senior or more valuable ones. So, many of us might be covered under Group Term Plans, as well. However, we might not have much knowledge of how they work and the benefits available under these plans. Here’s a quick roundup of the nuances and benefits of the group term insurance plans.
What is group term insurance?
Group-term insurance is one of the benefits that employers provide to their employees. Group term insurance is a life insurance plan that provides a death benefit in the event of an eventuality of the person insured. The group insurance plans provide coverage to a large number of people; irrespective of their demographic traits like age, occupation, income, and gender. Typically, the premium payable under the group plan is lower than the premium payable on individual life insurance plans.
- Group insurance is an employee benefit plan that is provided by the employer
- The employer pays the premium. It is provided free of cost to the employee.
- It is important to assess the coverage and ascertain if the same would be sufficient in the event of an unforeseen event
- Employees may, in some cases have the option of extending the coverage by using payroll deduction
How does group insurance work?
Group term insurance covers you as an employee along with your co-workers; the coverage amount will vary based on your hierarchy level in the organization. The coverage amount is the discretion of the employer, it is the prerogative of the employer to allow employees to extend the coverage by means of payroll deduction or inclusion of family members as part of the term insurance policy.
Key things to note in a group term policy
If your employer provides a group term insurance cover, you must consider the following aspects which will help you understand the benefits you can derive from these plans comprehensively:
Coverage amount:
The coverage amount called the sum insured would be paid to the nominee in the unfortunate event of an eventuality. The coverage amounts as stated earlier would be higher for people who rank as executives and directors, for lower-level employees it would be on the lower side.
Most group insurance covers are a multiple of your base salary; usually, Adhoc / occasional pay-outs such as commissions, bonuses, etc., are excluded.
Based on your situation and financial goals, ascertain if the coverage is sufficient; and look for options to enhance the same. Extending the group term insurance will work out economically as compared to availing a separate life insurance cover.
Premium cost:
The employer bears the cost of the premium. If you intend to extend the cover, then the premium for the additional cover has to be borne by you. This additional coverage will depend on your age, group insurance cover is generally inexpensive since it is not dependent on the individual traits; however, any additional cover availed upon this policy will have a premium quoted as per the individual traits. This, however, will be less cumbersome and economical.
Portability of coverage:
Group insurance coverage is available only till the end of the employment tenure with the employer. Upon quitting the company, the benefits of the group insurance seize immediately. Few insurers, however, offer portability of the group insurance plan by converting the same into an individual life insurance plan. Such conversions are subject to individual underwriting and revision of premiums.
Benefits for employees
It is apparent that Group Plans are free of cost benefits offered to the employees. However, there are other benefits as well mentioned below:
Low premium cover:
Group insurance plans have premiums lower than individual plans, the employee gets coverage at a significantly lower premium which is the key advantage.
Hedge against uncertainty:
Life cover is one of the most important aspects of a comprehensive financial plan. The group term insurance offers a hedge against the uncertain event of the eventuality of the breadwinner; which could leave your near and dear ones under severe financial stress.
Default eligibility:
All employees who meet the basic requirements of contractual employment for a minimum period, get the benefit of Group Insurance Plans. There is no individual underwriting for these plans.
Hence, there is no evaluation of risks from the perspective of individual issues and traits. This is less cumbersome and is extended seamlessly to all employees.
Claim settlement process:
The claim settlement process is far smoother than individual policies. Normally, the employer will support the beneficiary in submitting the claim with the insurance company. The process is not a long-drawn subject with numerous investigations and interviews; as in the case of the individual claim settlement process.
Peace of mind:
Having a life cover is critical to attaining financial peace, knowing that your family will not have to fend for bills and will have enough to continue to live a reasonably comfortable life is pertinent. Group life insurance reduces financial stress among employees.
Benefits for employers
The employers also derive benefits by extending group insurance to their employees, here are some of the benefits:
High Morale and better retention levels:
Term insurance provides a sense of financial peace to the employee. So, a Group Term Plan that is provided by the employer increases the loyalty of the employee to the company. All these aspects boost the morale of the employee and ensure that they optimize their productivity.
Low premiums:
The cost of insuring a large group of people is low under the group insurance plan. If the employer were to consider insuring them under individual life insurance plans, then the premiums would be much higher.
Tax benefits:
The amount paid as premiums towards group term insurance plans is tax-deductible under relevant sections of the Income Tax India Act in India. Essentially, the premiums are an expense and hence provide a tax benefit to the employer.
There are numerous group-term insurance plans available in the industry. A thorough comparison must be done on various aspects to avail the plan that aligns well with the requirement. SecureNow provides an across-the-board comparison of features across all the insurance providers in India. This would be a good place to start!
About The Author
Varun
MBA Finance
Varun has established itself as a knowledgeable and reliable expert in the field with 8 years of experience. Specializing in group-term life insurance, they have dedicated their career to helping businesses and individuals navigate the complexities of insurance products and services. Currently writing for SecureNow, he produces insightful blogs and articles that demystify group-term life insurance, offering practical advice, industry updates, and strategic insights. Their deep understanding of the insurance landscape and talent for clear and engaging communication make their content invaluable for both seasoned professionals and newcomers alike.
