Although the group was not created primarily to obtain insurance, there should be a transparent and obvious relationship between the members of the group and the manager for services other than insurance. Life insurance, health insurance, and/or other forms of personal insurance can be available through group insurance.
The majority of Indian life insurance firms have launched community insurance schemes to cater to the insurance needs of particular groups such as professionals, employers-employees, and co-operative societies, among others. When an employer purchases benefits for its workers as a reward, the employer becomes the policyholder, and the employee becomes the beneficiary. The insurer is in charge of processing claims under life insurance plans.
Group Term Insurance
A type of term insurance in which a single policy is provided to cover several individuals is called group term life insurance. The most popular category is a business, where the contract is given to the employer, who then provides coverage to workers as a reward. Many employers provide a basic level of group coverage at no expense and the option to buy additional coverage and coverage for employees' spouses and children. Person term life insurance is more costly than group term life insurance. As a consequence, there is a high level of involvement.
Group Term Insurance Plan
If you are a working employee, you can take advantage of a group term insurance package provided by your employer to protect your loved ones' future by providing them with a death payout if anything happens to you.
The insurance plan given to a group of people is referred to as a group term life insurance policy. In the event of an employee's death, group term life insurance plans provide financial independence to the employee's family. It aims to offer a cash guarantee to the beneficiary of a group term life insurance policyholder in the event of the insured's death.
Employer-provided group term life insurance plans have become an important component of employee compensation packages. Many fraternal organizations, in reality, provide community term life insurance to their members. For those with financial responsibilities, life insurance is a must-have product.
Features of Group Term Insurance
Employer-provided group term life insurance plans have become an important component of employee compensation packages. Many fraternal organizations, in reality, provide community term life insurance to their members. For those with financial responsibilities, life insurance is a must-have product. Similarly, large and medium-sized businesses and corporations have a single master policy covering all of their employees, known as a Group Life Insurance Policy. A community life insurance policy usually covers only you, your partner, and any children you may have. Some rules, however, allow you to expand your coverage to include your parents. Let's take a look at the policy's characteristics, advantages, and disadvantages.
Employers pay all of their workers under a group life insurance scheme, regardless of age, occupation, or social context. The following are some of the policy's features:
- Term Policy- In the tragic event that an employee dies in an accident, the group life insurance awards the total guaranteed Amount to the candidate selected by the deceased individual.
- Employee Cover by Default - The insurance coverage is a perk that comes with the employee benefits plan. If you've been accepted into a business, you're automatically enrolled in the plan. Some businesses allow you to purchase an additional individual plan and the group policy, allowing the individual policy to continue to operate even though you leave the company.
- Premium Payment - For certain situations, the group life insurance plan's premium is paid by the employer. In this case, the employee is responsible for the premium, which is deducted directly from his or her pay.
- Seasoned Fund Managers- Professional fund managers manage the funds accrued under the Group Life Insurance policy. The employer is provided with sufficient funds in the event of an emergency. Fund managers manage superannuation, gratuity, and other payouts on behalf of the employer.
- Gratuity Benefit- As an employee, you are entitled to gratuity benefits after working for a certain number of years for a company. Group life insurance enables an employer to save money to provide gratuity payments to workers.
- Credit Protection- When an insured individual dies with unpaid loan debt, banks and lending agencies are often forced to lose significantly. Banks may use a Group Credit Protection Plan to protect themselves from a loss in this case.
- Master Contract- The group life insurance policy is a type of insurance that is automatically provided to workers, regardless of whether they have insurance or not. It's a master contract in which an organization buys a master policy whose premium is determined by the number of members and the total assured amount selected by the corporation.
- Premium-The premium affects the number of members proportionally. As the number of members grows, so does the premium rate, and vice versa. If the insurer collects any excess premium money, it will refund it to the organization. The master contract operates in this manner.
- Contributory and Non-Contributory- There are two types of community life insurance: contributory and non-contributory. The employee contributes to the scheme by contributing a portion of the premium, while the employer covers the remainder. The employer entirely charges the premium in the above case.
- Affordable- Group life insurance is less costly than individual life insurance. This is because the insurance provider will combine different costs, including management, maintenance, and renewal, into a single master policy.
Benefits of Group Term Insurance
As the name implies, Group Term Life Insurance Plans are designed to provide life insurance to a group of individuals under a single scheme. A community insurance scheme is not limited to employer-employee groups and includes bank clients, NGOs, professional organizations, non-banking financial institutions, and microfinance institutions.
In the case of an employee's death, a group insurance program for workers provides financial support and freedom to the employee's beneficiaries. It provides various advantages, ranging from universal coverage for all to ranked coverage for different levels of members. Some community insurance plans cover unpaid debts for a group of creditors, and others have critical illness and injury coverage.
Default Insurance Cover
The policy covers members of a community insurance scheme simply by being a part of the group. It provides basic coverage for those without a personal life insurance policy.
Employers benefit from a structured approach to accumulating funds for their potential gratuity liability to workers. A group insurance scheme makes this easier for employers and offers life insurance coverage to workers.
Employers and contractors both profit from group term life insurance policies. Death benefits are tax-free under current tax laws, according to Section 10(10D) of the Income Tax Act of 1961. Furthermore, community insurance programs are successful in both employee benefits and retention.
Customizable to suit employee needs
Add-ons such as tuition premiums, repatriation allowance, accidental death, and more can be added to group insurance policies to cover a wide range of benefits in addition to the base cover.
No medical check-ups
Employees are relieved of the burden of medical examinations under Group Term Insurance Plans.
A group plan's premium is much smaller than individual plans because it covers many individuals. A group insurance policy, without a doubt, is a better way to obtain insurance cover against a variety of risk factors, let alone life. Begin by determining the best group strategy.
What are the Benefits of Group Term Life Insurance schemes to Employers?
- Employers profit from group term life insurance plans just as much as workers do.
- Group term life insurance plans make it simple for employers to fund their gratuity liability. Gratuity funds are strategically designed to cover future gratuity payments, alleviating the pressure on the employer.
- Returns on the funds will be collected based on the success of the client-selected funds.
- In India, group term life insurance plans are more affordable because running schemes on a group basis is less expensive.
- Funds that perform well will gain higher returns, which will reduce the employer's costs.
- Some programs provide both life and disability benefits to employees.
How does a Group Life Insurance Plan Work?
The flowchart for a group life insurance contract is as follows: A group administrator is given a master policy and pays an initial premium.
- This initial payment includes all of the group's participants for one year.
- Members of the party have the choice of selecting the sum assured. This sum may be a one-time payment or connected to a payroll or loan account, for example.
- After the policyholder pays the fee, the participants are compensated for a year from the policy's start date.
- The community life insurance contracts are renewable on an annual basis.
- The premium is calculated based on changes in the size and age distribution of the age group in question.
Who is eligible for group term life insurance?
Most businesses provide their workers with group term life insurance, which guarantees the financial stability of an employee's family even after he passes away. It aims to provide monetary benefits to the plan's appointed beneficiary in the event of the insured's death. In large companies, it also serves as a mechanism for employee retention.
Employee-employer classes, banks, non-banking financial companies, Non-employer – employee groups, specialist groups, and microfinance institutions all sell community term life insurance to the working class. The term insurance standards for eligibility differ for each of these groups, but all are subject to specific insurability requirements. Although some plans provide uniform and basic coverage to all plan members, others provide supplemental and graded coverage depending on the skilled ranking or role of the plan's members.
These policies have several appealing features that make them popular and an excellent choice for inclusion in employee benefit packages. Any of these characteristics are as follows:
- Age to be eligible for term insurance: The minimum age to enter is 18 years old, and the actual age ranges from 65 to 69 years old.
- Coverage: Many community term plans only cover the base salary; all other benefits, such as bonuses or reimbursements, must be declared as income. As previously stated, the community term life insurance plan coverage varies greatly depending on the employer. The amount of coverage depends on one's place and rank in the organization, with benefits for the top management being significantly higher than those for the lower ones. Some small and medium-sized businesses, on the other hand, offer a uniform, flat coverage to all of their workers.
- Premium Cost: Premium payments are made either entirely by the employer or in part by the employee salary during his tenure. When such plans are bought at a young age, they are inexpensive. The group term plan covers all qualifying workers by default, and premiums are calculated based on that employee group.
- The cost of insurance increases incrementally as you get older in most policies' premium cost bands. In most cases, each premium cost band is listed in the plan document. As a result, a healthier employee in the company will help in the reduction of high premium costs for others.
- Tenure: The policy typically has a one-year limit. After that, the program must be renewed every year.
- Portability: Since overage is linked to one's current work, coverage immediately ends when one leaves that job. On the other hand, certain insurers offer the conversion of a company GTI policy to an individual insurance policy when changing employment. This is a compact alternative with higher premiums and extra costs.
Group Term Plans in India
Some Group Term Plans in India are:
Bajaj Allianz Life Insurance Group Term Insurance:
The Bajaj Allianz Group Term Life Insurance scheme provides up to Rs. 1 Crore in life insurance coverage, providing financial security to your family in the event of your death.
No Medical Underwriting
A one-of-a-kind Group Insurance scheme that provides high life insurance coverage of up to Rs. 1 Crore without requiring a medical examination.
Critical Illness Rider
With an add-on cover for Critical Illnesses including Cancer, Kidney Failure, Heart Attack, and others, you can expand your security and tailor your Group Insurance plan with coverage of up to Rs. 10 lakh.
Tata AIA Life Insurance Group Term Life
The Tata AIA Life Insurance Group Term Life plan helps one to plan your future expenses and liabilities with an adequate cover, ensuring that their loved ones have a stable financial base. The Group Plan has the following features:
- Provides a comprehensive cover with tax benefits
- The minimum Sum Assured is Rs. 5000.
- The Minimum Age is 14 years and the maximum age is 84 years
- Ease and flexibility of premium payment
ICICI Group Term Insurance:
- One may select the Amount Assured that will be given to the member's nominee* as the Master Policyholder.
- It may be a flat or graded volume of coverage. The flat cover is used when all members of a party have the same Life Cover. A graded cover, on the other hand, is when different individuals are given different Life Cover based on pre-determined grades.
- This Sum Assured amount may also be attributed to debt amounts, other financial obligations, or even the employee's compensation in the case of structured classes.
- The Life Cover number is a multiple of the annual salary as it is added to it. For eg, if a member earns Rs. 10,00000per year and the multiple considered is 2, his Life Cover sum would be Rs. 20,00,000
HDFC Group Term Insurance Plan (GTI):
It is the people who make a company successful, regardless of the industry. Everyone needs life insurance, particularly if they have financial responsibilities to others. The HDFC Life Group Term Insurance Plan satisfies this need and is an excellent way for employers to strengthen their ties with their workers.
It has the following features:
- Term Plan with one-year renewable premium option
- Covers both natural as well as Accidental death
- The GTI covers vehicle or housing loans and even gratuity liability of the future.
- No medical check-ups required up to the free cover limit
Important Aspects of Group Term Life Insurance
Although a company can sell group life insurance to its workers, it is important to be aware of those aspects of the policy to get the best value when it is required. The following are some of the points:
- Group insurance schemes have many advantages, such as gratuity, but they can only be used as a complement to individual insurance plans with extensive coverage.
- Since the employer and the insurance provider determine the terms and conditions of community life insurance, it cannot be transferred to an individual policy.
What Are the Advantages of Buying Group Life Insurance Policy?
A community life insurance policy covers a large number of individuals at once. The following are some of the benefits of buying a community life insurance policy:
- Since the premiums for such policies are so low, the Amount assured given in the insured's sudden death is not prohibitively expensive.
- At a small additional expense, riders such as injury benefit, serious illness, accident, and disability may be added to the coverage provided.
- Insurers have the option of choosing their preferred method of premium payment.
- Section 37(1) of the Income Tax Act of 1961 provides tax benefits on the Amount of premium charged.
A1.The minimum age for registration into a group term life insurance plan is 18 years.
A2.A community life insurance plan's median age for enrollment is 69 years old. At the time of the policy's expiration, the maximum age is 70.
A3.A community term life insurance policy has a one-year term.
A4. The community term life insurance policy guarantees a minimum sum of Rs.1, 000.
A5.Yes, indeed. It's a good idea to have term insurance outside of what your employer provides because if you change jobs or leave your current job, your family can lose the protection they need. Given that your boss is unlikely to be aware of your circumstances, such as dependents, liabilities, and so on, It's quite possible that your employer's group insurance plan won't be enough to cover all of your dependents while you're gone.
A6.In the insured's premature death, the insurance provider will pay the death benefit to the designated candidate.
A7.Until purchasing group life insurance, a medical examination is not needed.
A8.Return of premium life insurance allows one to get the premium paid amount back at the end of the policy's term. One can add a return of premium rider to your policy during the application process to get this form of coverage.
A9.You'll get the premiums you paid back by the end of the policy's period with a refund of the premium life insurance policy, but penalties and extra rider costs aren't always included. The catch is that because you want your money back, life insurance companies charge more for the return of premium policies. Term life insurance premiums are typically 30% higher than regular term life insurance plans.
A10.No, with Group Term Insurance plans, the coverage ends with the end of the contract with the employer.
A11.No, the plan does not provide any Maturity Benefit.
A12.Yes, one can get rider add-ons by paying some extra premium.