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Modified 23 May 2018
Group life insurance products offer benefits to a group of people. Group policies are affordable and the cost of insurance is much lesser than for an individual policy. The insurance cover will be provided to a group of people under a single master life insurance policy. Employers are bound to provide an insurance plan to their employees and therefore often offer group insurance cover. By providing insurance coverage to employees, they increase their sense of loyalty, resulting in enhanced productivity.
Benefits of Group Life Insurance
A group life insurance policy can be offered to any group of people regardless of their age, profession and social background. In addition to the policy provided by employers, there are various types of group insurance policies.
Gratuity – On completion of a certain number of years of services with the company, the employees often receive gratuity benefits from employers. By subscribing to a Group Life Insurance Policy, the employer will be able to build funds so that a gratuity benefit can be offered to employees.
Superannuation – The amount accumulated through the Group Superannuation method will be paid to the employee during the retirement period.
Term policy – If a member of the group life insurance plan dies, the sum assured will be paid to the nominee of the member.
Savings plan – Group Savings Plans can be used to accumulate wealth over a period of time. They also deliver life insurance benefits seamlessly.
Credit protection – Banks and lending agencies often opt for Group Credit Protection Plans to protect their interests. If a borrower fails to repay a loan due to death or disability, this insurance plan protects banks from the loss.
Coverage by default – A group insurance plan is offered to member automatically. As soon as you join the organization, you will be enrolled in the group insurance plan, it has subscribed to. After the payment of the premium for the new member has been made, the insurance coverage can be availed.
As long as you are associated with the group, you will continue to get a group insurance cover. You can buy an additional policy also as per your needs. You should go through the terms and conditions of the group policy offered by the employer and accordingly opt for an individual policy to ensure that you have a comprehensive coverage. When you buy an individual plan, the coverage continues even if you leave the organization.
Ease of premium payment – The premium for a group life insurance plan can be paid very easily. You will never miss paying your premium as it will simply be deducted from your salary account. Thus, the payment mode is very convenient for the employer as well as the employees.
Efficient fund management – The fund accumulated by a group insurance plan is managed by experienced fund managers from the insurance provider. The employer will be provided with sufficient funds to handle emergencies. The superannuation, gratuity and other payouts can be managed very easily with the available cash flow.
Features of Group life insurance policy
Master contract –Individuals are enrolled into a group insurance plan automatically. Let us explain how it works. Under a group insurance policy, an employer will purchase a master contract from an insurance company. The premium will be based on the number of members and the amount of coverage offered. If there is an increase in the number of members, the premium will increase proportionately. Similarly, the excess premium will be returned by the insurance company if there is a drop in the number of employees. The insurer will account for the group’s collective health, but members will not be required to undergo any medical tests.
Affordable –Group insurance policies are not as expensive as individual insurance policies. This is because the large number of insured under one policy allows the insurer to club together various kinds of expenses such as administration, operation and renewal.
Contributory – If the plan is sponsored by the employer, there is no financial burden on the employee. On the other hand, the employee should partake in the premium by paying a nominal amount which comes under a contributory life insurance plan.
Types of insurance plans
Term life coverage – Most group life insurance policies offer term life insurance cover. The policy can be renewed on an annual basis. No evidence needs to be provided to the insurance company to avail the insurance policy. Thus, it is possible to enroll in the plan without undergoing medical tests. This simple and straightforward process delivers benefits to the employers as well as employees. Employers get a tax deduction for buying an insurance plan. If the insurance plan is contributed by the employee, the amount paid by the employee will be deducted from income tax under section 80C.
Permanent life coverage – Permanent life insurance offers coverage for the entire lifespan of members. There are different clauses under permanent life insurance coverage.
- If you subscribe to a general group insurance policy, the cash value will not be available to the employee. When you leave the organization, it will be available to other members.
- If you go for a paid-up policy, you will get the benefits of a term policy and a whole life insurance plan. The expenses towards the term policy will be borne by the employer and the payment for the whole insurance portion will be borne by the employee. If you exit the company by means of retirement, resignation or getting laid off, you will continue to own the policy and can enjoy the benefits throughout your life.
- When you choose the universal life insurance plan, most of the risk is borne by the employer. The group insurance plan will have same features as that of universal individual life insurance plan.
Drawbacks of group life insurance plans
The group life insurance premium is very low and very affordable. However, the cover is also limited so that you should buy an additional insurance plan. By choosing the most suitable individual insurance plan, you can make the most of your investment.
The group life insurance plan offered by the employer will not cover your spouse and children. Hence, you should reassess your insurance needs and you choose the best policy as per your needs.
LIC Group credit life insurance plan
The group insurance policy protects against the risk of credit as well as life. The coverage of the insurance is directly proportional to the loan amount and the rate of interest.
- In case of the unfortunate death of a member, the death benefit will be paid to the nominee.
- The entry age is 18 years and the exit age is 60 years.
- The minimum sum assured is Rs. 4 lakhs and there is no maximum sum assured.
- The policy term ranges from 5 to 35 years
- The minimum group size is 50
- Tax benefits are applicable as per the Income Tax Act
- The master policy can be surrendered at any time.
Bajaj Allianz Life Group Term Life plan
Bajaj Allianz offers various kinds of group insurance plans. These plans are devised to offer the highest level of protection for members as well as their families. The employer can offer uniform cover or varied cover.
- By going for a graded cover, it is possible to offer benefits as per the rank, salary level, outstanding loan, liability, and size of one’s bank deposit. It is possible to customize the policy as per the needs of the employer.
- The term policy does not offer a maturity benefit. There is no surrender value for the plan. If the member dies during the term, the payouts are made to the nominee.
- You can subscribe to additional riders such as partial disability rider, critical illness rider, and accidental death benefit rider.
Sbi Life - Sampoorn Suraksha
The comprehensive insurance coverage can be offered to employees and the policy can be customized as per the needs of the group.
- In case of death or disability of a member, financial support will be awarded to the dependents of the member
- The benefits can be subscribed to as per the needs of the group
- It is easy to include new members in the plan
- By choosing riders, the coverage can be enhanced.
- You can avail tax benefits
Group insurance policy offers the best benefits to group members. In addition to the risk to life, gratuity benefits are also offered by comprehensive insurance plans. Employees are provided many benefits under a group life insurance plan. However, even though there are many benefits with a group life insurance plan, you should consider it as a supplementary plan and most of your requirements should be covered by an individual plan as individual plans will cover you even after you cease to be a member of the organization. The individual plan offers many benefits and it is possible to cover your spouse, parents and children as well.
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