Group Life insurance is often a prerequisite as a part of the employees’ total emoluments package. Group term life plans are great for preventing employee attrition. In a rapidly changing job market, talent is becoming a rare commodity. Employees are aware of the market value of their job skills and can leverage the same to seek better opportunities. Group term insurance is a way to retain employees and prevent employee turnover by providing better financial protection for their families.
Benefits of a Group Life Insurance Policy for Employees
- Financial Coverage: If there is a group term insurance policy in place in an organisation, employees are assured that their family and near and dear ones will be financially protected in an adverse event. They are assured that there is a financial safety net covering their families.
- Cheaper premiums: In the case of Group term insurance policies, the employer would pay the life insurance premiums for its employees and their families. Even in cases where the employee has to pay a premium or a portion of the premium, the premiums are small as the risks are distributed over the pool of the employees. The employer and the employee share the premium contributions, making it a more economical option. The insurance premiums go up in rate bands according to the employee’s age.
- Tax-free death benefit: The death benefits received by the employee’s family are exempted from the payment of any tax. Death benefit tax is exempted under Section 10(10(D)) of the Indian Income Tax Act.
- Comprehensive Coverage: This policy provides comprehensive coverage to employees who cannot afford to take individual term insurance plans. All eligible employees are covered according to the terms of the insurance plan.
- Additional Riders: The Group term life policy can be expanded with riders to include education grants, repatriation grants, accidental death etc.
- No medical examination: In the case of group life policies, there is no requirement for medical examination or filling up of documentation to get the policy issued. This benefit also extends to the coverage of family members.
- Seamless integration of payment mechanisms: There is no risk of missing an insurance premium due date. All payments are debited to the employee’s salary account or any other account designated by the employee.
- Added Prerequisite: When the employer provides and pays for the Group term insurance plan, it constitutes an added prerequisite. It constitutes a group saving method and group superannuation amount collections get paid to the employees upon their retirement.
- Coverage by default: If new employees join the organisation, they automatically join the scheme by default.
- The benefit of experienced fund managers to manage the corpus: There are experienced fund managers at the insurance provider who will manage the funds appropriately to ensure adequate funds are available for making the claims payout. An employee can choose the fund options to invest and the returns will be determined accordingly.
- Switching: When the employee quits the job, some companies offer the option to convert the group term life insurance into an individual permanent life insurance policy.
- Payment of gratuity: Term insurance plans enable employees to receive gratuity payments through these plans.
How Do Group Life Insurance Plans Work?
- A group administrator is appointed who looks into the premiums.
- The initial payments cover all employees under the plan for one year.
- The option to choose a sum assured is given to the employees. It could be linked to their salaries or a lump sum amount.
- The plan coverage starts immediately upon the payment of the first premium.
- Group life plans are annually renewable.
- The premiums are charged based on the size of the group and the alterations to the age composition of the group.
- New employees who join the organisation are seamlessly added to the plan.
- A pre-decided sum assured is paid to the family of the bereaved employee
- Added coverage is available for critical illness, terminal illness, accidental death and disabilities etc.
- The application and the claims processing online are easy and seamless.
Eligibility
Normally, these plans are provided to organisations with 50 or more employees. However, custom-made plans are also available for organisations with a smaller number of members.
Key Takeaways
Group Life insurance plans retain key employees and talent. The added prerequisite also helps in improving on-the-job productivity and enables fund accumulation to make gratuity payments to the employees. These are a great way to boost employee morale and increase the reputation of the organisation in the marketplace. They enable companies to differentiate themselves from their competitors who may not provide such a prerequisite. Employees will know that their near and dear ones will be secure in the knowledge that their company will always protect them financially, even in case of an unfortunate incident.
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