Group Term Life Insurance Policy Benefits both employers and employees in multiple ways:
Benefit for Employers
- Group term insurance helps in the retention of talented employees.
- The premium or cost of such a policy is tax-deductible for the firm.
- Helps maintain a healthy relationship with employees and retain the preferred employer brand.
- It is an inexpensive employee benefits scheme.
Benefit for Employees
- Maintains financial safety for the family of the employee, in case he/she meets with an untimely demise.
- Some insurers and corporate may allow add-on benefits to employees.
- The life cover is virtually free for the employee.
- No medical examination is needed for the employees to be covered, and employees not eligible for individual insurance also can be covered under group terms if the firm employs them.
Case on Group Term Life Cover Benefits
Jingle.com is a start-up company that commences operations in 2010. It now employs 100 people. There are 40 managers in the company, in an average age group of 32-35 years old. By 2017, there are many competitors for jingle.com.
The employer (Mr. Guru) decides to buy a group life insurance policy of 10 years. He decided to pay an annual premium, considering the rate of attrition in the present scenario. He contemplates providing equal risk cover to 40 managers in his company.
The benefit to Jinglee.com and Mr. Guru.
Mr. Guru has found an effective way to incentivize his select base of employees. A tenure of 10 years is sufficient, considering the nature of the industry. Also, the age group is right, as during this period an employee may be actively considering a maximum investment. It will supplement existing individual policyholders (if they have an active policy).
See: Who can purchase Group Term Life Insurance
It will further incentivize an employee to spend time with the company, as Guru has rewarded them with extra life security cover. Guru will only benefit, as his employees are likely to devote more time to the company. He also has a choice to terminate the policy mid-way, if it doesn’t work out his way.
The benefit to Employees of Jingle.com
Jay is a 34-year-old manager with the company. His annual salary package is 18 lakh per annum. His spouse is also working and together they are raising two kids. Jay decides to invest in a house. So, it coincides with the group term policy registration.
Therefore, Jay has the option to add supplement cover against his home loan. Jay plans to stay with Jingle.com, because, as he now has a clear benefit of security against his life and his home loan.
Competitor of Jinglee.com
HyperFyre.com a firm operating for a couple of years in the same arena in Jinglee launched its services. However, after just a few years of success and venture capital funding, Jinglee attracted a lot of expert workforce from HyperFyre.
HyperFyre faced escalating recruitment costs due to high attrition rates and had a tough time maintaining quality operations after Jinglee came into being. Some of the flaws as pointed out by an analyst, existed in HyperFyre’s employee benefit schemes.
Where an employee at Jinglee started with the pension and health benefits from day one, a longer stay would also make them eligible for Gratuity. HyperFyre, though provided the pension benefit, it did not offer health life or any other benefit. Five years in Jinglee would be more beneficial for the worker, than in HyperFyre at the same pay package.
