As the name suggests, group term insurance plans are protection plans that cover multiple individuals under the same cover. These plans exist to meet the specific insurance needs of a group of individuals, usually, employees working in an organisation or members belonging to the same family.
So, besides employers, members of society, members of an employee welfare organisation, and other similar groups of people subscribe to these plans. This article discusses its importance and types.
Why Group life insurance plans (GLIS)
Having a group life insurance plan benefits both the employer and employee. Here is why:
- Lack of prerequisites for qualification: Unlike the case with individual life insurance plans, the group life insurance plans do not include many requirements to purchase them. For example, a medical checkup is not necessary in the case of GLIS, whereas it is mandatory for individual health plans.
- Lower premium outflow: Purchasing a myriad of individual life insurance policies for their employees would cost a tonne of money for the organisation. So instead, group insurance allows them to cover all their valuable employee without shelling out excessive cash as premium outflow.
- Wider coverage: GLIS is cost-effective and a more feasible option, especially when you have a workforce under you. In addition, it provides broader coverage than individual insurance plans at the same premium and is often offered to the employees free of cost or at a subsidised rate.
- Helps in improved retention rate: The feeling of security is what most individuals look for in their professional lives. So, when organisations cover their lives with top-notch insurance plans, it gives them a sense of belonging and security, thereby enabling a reduction in reducing employee turnover and improving loyalty.
- Easier claim settlement: One of the biggest gripes with individual life insurance plans is their cumbersome claim settlement process. Things are straightforward with group term insurance, and beneficiaries enjoy hassle-free claim settlements once they submit the requisite documents.
Types of group term insurance
In the Indian scenario, group term insurance can primarily be classified into two types:
- Contributory: As the name suggests, contributory GLIS refers to plans where the group members enjoying the perks of the policy have to pay the insurance premium either entirely or at a subsidised rate. In non-professional scenarios, such as families and welfare groups, employers often deduct a certain amount toward insurance premiums from the covered employees’ salaries.
- Non-contributory: Here, the group members do not have to pay a single penny to enjoy the perks of the insurance plan. In a non-contributory GLIS setting, the cost is borne in full by the individual subscribing to the policy, such as the employer.
Popular Group Life Insurance Plans prevalent in India
Group superannuation plans
- Group superannuation plans are offered to employees to help build their retirement capital. It is a pension alternative for other schemes, such as National Pension Scheme and Employee’s Pension Fund.
- Under such a contract, the employer contributes a pre-agreed sum for every period in the beneficiary’s account. It allows the employee to build a sizable corpus to help them fund their retirement life with ease.
GULPs (Group Unit Linked Insurance Plans)
- GULPs or Group Unit Linked Insurance Plans are also known as Group Gratuity Plans. These are similar to the standard ULIP plans and offer the dual benefit of protection and investing to the beneficiaries.
- Here, a chunk of the premium is invested in viable investment mediums, such as stocks and ETFs. The rest is kept aside for life insurance needs.
- It allows the employees to garner the benefit of capital appreciation, which they can receive at the time of leaving the job or on retirement.
Group Employee Deposit Linked Insurance plans
- The Group Employee Deposit Linked Insurance plans are offered as part of the Employees’ Provident Fund scheme.
- The value of the insurance depends on the contribution made to the EPF. Presently, these plans provide death/disability insurance payments of up to INR 6 lakh.
Group personal accident insurance
- The group personal accident works like any other accident insurance plan, with the only difference being that it covers a group instead of an individual.
- It is one of the most coverage types for companies and covers the cost of accidents when the employee is on duty, resulting in hospitalisation, partial or complete disability, or death.
- The payout levels depend on the seriousness of the occurrence, and it also covers expenses related to hospitalisation, such as ambulance charges.
Group term life cover
- Similar to individual term insurance, the group term life cover offers financial independence to the employee’s family in the event of their death.
- It provides a monetary guarantee to all those covered, which is paid out in the case of their demise.
The pandemic has proven that life is uncertain, and things can go berserk anytime. So, it is imperative for the employees to feel motivated to go to their workplace every day. One of the best ways to do it is to provide them ample cover by offering them benefits such as a group term life insurance plan. It would help them stay motivated and contribute towards the organisational goals with ease.