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Group Life Insurance

Group Life Insurance: Everything You Need to Know

Insurance is a very important part of every individual’s life. It is a protection against future mishaps and an assurance against accidents that may or may not happen in the future. As a result of continuous development in the field and companies realising the importance of providing more affordable schemes, group life insurance is one such scheme.

A group life insurance provides insurance to a large group of people, usually the employees of a company where the employer is the policyholder. The group life insurance provides a little less coverage than other life insurances because of it being almost free. If the employee accepts the group life insurance, a small amount may be deducted from his or her pay check, depending on the policy.

What are the Features of the Group Life Insurance Policy?

Group life insurance is a vast insurance policy that was introduced to provide affordable insurance schemes. It covers various features that are made to ensure the affordability and efficiency of an insurance policy.

  1. Covers a Group of People: The group life insurance policy works under the master contract policy. This means that a large number of people can be covered under a single policy. The insurers do not have to go through the long process of form filling. The employer is the applicant and the master policyholder. He/she is the one who chooses the plan and completes all the formalities of the group life insurance.

  2. Freedom of the Insured: The group life insurance has the amazing benefit of not bounding those insured to the policy. The applicant or employer can add or remove any insured at any time. There is no limit on changing the insured individuals or any hard formalities to complete the process.

  3. It is Affordable: Affordability is the key feature of a group life insurance. The employer and the employees may share the cost of the insurance, thus making it highly affordable for every individual. Only a tiny part of the employee's salary may be deducted for the premium of the group life insurance.

  4. A Wide Range of Plans: The group life insurance offers a number of insurance policies that can be issued according to the employer’s need and expectations. The two main policies are Group Term Life Coverage (the insurer can increase the premium annually) and Group Permanent Life Coverage which is further divided into various other categories. Permanent life coverage is less common than the term life coverage.

What are the Benefits Of Group Life Insurance?

  • Yearly Rewards - If the employee has worked with the company for a few years, he or she is entailed to certain rewards and bonuses. This is because the employer can build up funds from the regular collection of premiums.

  • Financial Security - The employee receives the benefits of the life insurance plan once he or she retires from the job. This is extremely beneficial in case the employee wants to save for the retirement phase of his life.

  • Term Policy - This is a very crucial part of the group insurance policy. If unfortunately, the assured dies before the completion of the term plan, the sum assured amount is paid to the nominee of the assurer.

  • Professional Fund Management - The collected premium and the group insurance policy is handled by seasoned professionals. The employee won’t have to worry about the mismanagement of funds as they are in trusted hands.

  • Affordable Premium Payment - The premium amount of the assured may be decided as a small percentage of their salary. So, the employee doesn’t have to go out of their way to pay the premium as it deducted monthly from their pay check.

How Does Group Life Insurance Work?

The motive behind the group life insurance is to provide financial security to the employee. This ensures that the employees feel secure and have financial stability when they retire from the company. The employer takes care of the group life insurance policy and he or she is the only applicant of the policy.

The employee has to pay a small amount of his or her monthly income as a part of the premium of the policy. This amount may be collected by the employer for the time the employee works for the company or the employer might bear the entire expenses from his own pockets. At the end of the term or in case the employee leaves the job, the sum is paid to the employee.

In case of an unfortunate death, the amount is paid to the nominee of the employee. This assures that the premium is paid to the trusted person and the employee and his family can have financial support after his or her retirement.

Why Do We Need Group Life Insurance?

Group life insurance as established, is a very beneficial policy for the employees of the company. Other than this, it also gives the employer many benefits.

1. Increased Productivity - The group life insurance gives financial security to the employee. It ensures that the employee gets all the benefits from his or her job and thus, increases employee productivity.

2. Assured Retirement - The employee needs financial stability after he or she retires from the job. The group life insurance gives them this financial coverage, once they successfully finish their working tenure.

3. Attract Talent - The financial security provided by the group life insurance makes sure that the employees are happy in their workplace. This helps the employer attract better workforce and hire more talent.

4. Avail Tax Benefits - The employer can get eased up on taxes due to the group life insurance plan. This is because the premium collected for the group life insurance is not taken as company profit, but as a business expense.

What is Covered Under the Group Life Insurance Policy?

As mentioned above, group life insurance is further divided into many schemes. The coverage depends on the kind of policy that the employer entails.

1. Group Term Life Insurance

The nominee of the employee will be paid a lump sum amount, in case of untimely death. In addition to this, the employee gets regular life coverage benefits.

2. Group Gratuity Plan

In this, if the employee retires or resigns after five years of working in the company, the employer has to pay gratuity to the employee.

3. Investment-linked Insurance Plan

The investment-linked insurance plan offers investment benefits other than the life coverage. The employee gets market linked investment returns via active market participation through the defined investment funds.

5. Group Mortgage Redemption Assurance Scheme

This policy adds insurance security to the employees that have availed for a loan. It also provides life coverage benefits.

6. Group Leave Encashment Benefits

This is a bit similar to the Group Gratuity Plan. The employer has to pay a leave encashment to the employee in addition to the life coverage scheme.

What is Not Covered in a Group Life Insurance Policy?

The group life insurance covers a large number of benefits as already seen, but there are scenarios where the group life insurance fail to provide cover. Here are some such cases.

1. It May Not be Enough

The group life insurance is an affordable way to get life coverage if you have low income and you’re not able to invest in personal life coverage. But, in case you’re hoping that it would be enough, you’re mistaken. The group insurance is not much and may not be enough to spend a comfortable retirement.

2. The Uncertainty of the Job

Most people tend to change jobs several times till they reach the age of retirement. This will keep changing your life coverage plan and there is a high possibility that your next job may not cover the group life insurance. So, it is not a very efficient method of investment.

3. You Don’t Have Control Over the Policy

The employer is in charge and the sole controller of the policy. The life insurance offered by the company may not be enough or might not cater to your needs. Your expectations from the policy solely depend on you and you’ll have to get insured separately.

How to Claim Group Life Insurance?

A claim has to be usually availed in case of the death of the employee. In such situations, the nominee has to submit the following documents-

  • The claim form
  • Certificate of insurance
  • Original death certificate
  • Current address proof of the claimant
  • Photo ID proof
  • Bank passbook or a cancelled check

The documents are checked and assessed by the employer and the claimant is given a date to clear the expenses. Once the documents are successfully checked and verified, the claimant is handed back the original documents and the claim is processed as per the set guidelines.

FAQ on Group Life Insurance

What is a group life insurance policy?

A group life insurance policy is a collective life insurance that includes a large number of people as members.

Can you cash out group life insurance?

You cannot cash out a group life insurance policy until the completion of the defined situation like retirement or completion of 5 years in service.

What are the key features of a group life insurance policy?

The key features of the group life insurance policy are-

  • Single Policy for a large no. of people
  • Affordability
  • A wide range of plans
  • Freedom of insureds

List down popular group life insurance providers in India?

Popular group life insurance providers in India are

  • Bajaj Allianz Term Insurance
  • Aegon Life Term Insurance
  • Birla Sun Life Term Insurance
  • HDFC Life Term Insurance
  • ICICI Prudential Term Insurance

Does group life insurance have cash value?

Yes, group life insurance has a cash value depending upon the type of group life insurance policy taken by the employer.