Coverage under group life insurance policies depends on the terms and conditions under which a company buys the policy.
Types of group insurance policies
There are different group insurance policies that come with life insurance cover.
This policy offers a lump sum benefit payable to the specified beneficiary in case of the death of an employee during the period of the plan. Usually, coverage equals a multiple of the employee’s annual salary.
For employers, this is a plan that helps build funds to pay gratuity to employees. And life cover for employees is an added benefit. Whenever an employee retires, resigns, or leaves a company after having worked there for five years, they get gratuity.
Group investment-linked insurance plan
Apart from life cover benefits, this plan offers investment benefits to employees. So, the insurance takes care of life cover which means a payment to beneficiaries in the event of the death of the group member. And the investment in market products means added financial support.
Group leave encashment benefits
Like the gratuity plan, this scheme too helps the company build funds. Then, the company can use these funds to pay out leave encashment to employees. As in the case of other plans, life insurance is an added benefit.
Group mortgage redemption assurance scheme
This plan provides insurance protection to employees who have taken a loan. That is, the cover each year typically equals the outstanding amount due at the time. Thus, the plan frees the bereaved family of the insured from liabilities.
Group critical illness rider
In addition to life cover, this plan offers a rider that gives protection for any critical illness. This means that the insurer makes a payout when the insured gets a critical illness (covered in the policy) diagnosis.
Case study: Employees benefit from group life cover
QWT Pvt. Ltd. is a textile manufacturing company with 600 employees. It recently purchased a group life insurance plan with gratuity and critical illness cover for all its staff.
Mr. Ram Nath is a factory supervisor who has been working with the company for the past 10 years. One day, while at work, he experienced severe chest pain. The factory staff took him to the hospital immediately. Unfortunately, he passed away en route to the hospital due to a sudden heart attack. Ram was married and had two kids. The group insurance policy paid his beneficiaries Rs. 1 crore under the terms of the life cover. Additionally, Ram Nath was also eligible for gratuity. Since the group life insurance plan also covered gratuity, the insurers also paid out his gratuity.
Mr Aslan Jafri heads the company’s marketing department. One day, while he was in office, he felt a stinging pain in his chest. Immediately, his colleagues took him to the hospital. Examination revealed that he had suffered a heart attack. He needed treatment for the same. The group life insurance plan had a critical illness rider. So, the insurer paid a lump sum to Aslan which covered most of his treatment costs.