How Beneficial is it to have a Group Life Insurance?
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Updated date : 05 December 2016
Employee attrition has become a common issue for a large number of organizations, these days. And, in order to effectively deal with this issue, HR department keeps on trying every trick in the book to retain their valued employees. One of the most effective ways to do so is to have group insurance for the staff.
What is Group Insurance?
Group insurance policy, typically, means life insurance product especially conceptualized to cover a fairly large group of people under a single contract. In a group insurance contract, the policy owner is the employer or an organization, and the policy covers employees or members of that particular organization.
Why is Group Insurance Policy Not So Popular?
You’ll be surprised to know that the share of group insurance policies in effect in the year 2013 was 41%. These policies were issued through groups, including workplaces, labor associations, or other homogenous groups.
Despite the fact that group insurance policies form a major part of the insurance market, a large number of people do not really understand and integrate their sponsored group benefits into their overall financial situation. Resultantly, they end up spending a lot out of their own pocket for a supplemental medical insurance policy.
Remember, a group insurance policy provides an adequate coverage against medical emergencies for you and your loved ones, irrespective of your age, gender, profession, lifestyle, and social background.
Benefits of Group Insurance
Although there is not much difference between group life insurance policies and individual life insurance policies, the benefits offered by group life insurance policies are relatively wider and usually unknown to many. And, that’s why we present to you some relatively unknown benefits of group insurance policies.
- It Provides Tax Benefits to Employers - Group insurance plans offer tax benefits to the employers. Moreover, members of the policy (employees) also get to avail tax benefits. Besides, the plan offers dual benefits to its customers and serves as an employee welfare plan as well as an employee retention plan. As discussed, these plans also extend its coverage to the family of the insured.
- It Offers Huge Savings to Employers - Group life insurance offers cover at a subsidized rate. Hence, these plans make it easy for a large section of people who are unable to afford a life insurance policy. The premiums to be paid are evaluated by insurance companies, based on the risk factor of the groups as a whole. The payment of premium can be generally contributed in two ways.
- Either the whole premium amount is paid by the group owner or the company who has purchased the policy for its employees or members.
- A partial premium amount is paid by the insurer while the rest amount is paid by the members of the group.
- It is Pocket-Friendly for Employees too – In many cases, the amount of insurance premium is split between the employer and the employee. Even in such cases, you’ll find that group insurance plans are up to 30-35% cheaper than individual health plans. And, the premium that you’re paying is quite low comparatively.
- It Provides Coverage To Employees’ Family Too - If you have a group insurance plan, then you don’t need to worry about having to spend on supplemental coverage for your family members. Most group insurance policies provide adequate coverage to your family members (your spouse and children).
- It doesn’t Require Medical Check-Ups – This is perhaps the best benefit that group insurance policies offer. You do not necessarily need to go for medical check-ups for self or your family. You get automatic coverage under your employer’s group health insurance as soon as you start working for them.
Wrapping it Up!
While zeroing in on a group insurance plan, it is important to note that though there are numerous benefits offered by the policy, it has some limitations too. Benefits of a group insurance plan; be it a life cover, saving or superannuation, is terminated once a member leaves the group or organization.
Secondly, the sum assured is usually limited, as a group term life insurance plan is purely an employee benefit plan. Consequently, the coverage offered by these plans may not be enough to fully secure your family on retirement, sudden illness, or even death.
Having a group insurance plan as a supplementary is beneficial, cost-effective, and hassle-free, but it is wise to opt for a separate life insurance plan. With a group insurance plan in your pocket, you can be armed to fight the emergencies even if you do not have an individual life insurance plan.
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