BHUBANESWAR, AUGUST 26, 2022
Out of the many factors that contribute to the performance of a successful company, its workers and their happiness are perhaps the most significant ones. Workplaces will always have a productive environment as long as people are happy with their jobs and employers.
Employee satisfaction is influenced by a wide range of elements, such as financial stability, a variety of responsibilities, professional advancement, and recognition. A group insurance coverage aids in addressing the employees’ need for financial security. Therefore, as an employer, you may select from various group life insurance plans to shield your employees’ loved ones from certain unforeseen life events.
Regardless of age, gender, socioeconomic status, or occupation, all employees covered by a group insurance policy receive several advantages, including life insurance. Group Life Insurance is one of the essential benefits all organizations and businesses should offer to their employees.
What is Group Life Insurance?
As its name suggests, a group life insurance plan offers life coverage to a group (formal or informal) of people. It is essentially collective life insurance, as opposed to individual life insurance. Businesses, associations, or societies typically purchase group life insurance plans to offer their employees or members life insurance coverage.
How Does Group Life Insurance Work?
While group life insurance is comparable to a standard life insurance policy, there are some key differences.
For instance, in the case of a business, the employer would purchase group life insurance to provide life insurance coverage to its employees and be responsible for paying the premiums. But in some cases, the employer and the employee may each contribute a portion of the premium.
Second, the company chooses the death benefit amount assured for each employee under a group life insurance plan. The employee’s income often determines the death benefit. Employees may choose to increase their coverage in some group insurance policies. However, doing so might result in a rise in the premiums, which the employee would then be responsible for paying.
Finally, a group life insurance policy for employees only covers them while working for the company. Therefore, when they leave the group (the company) or retire, the coverage ceases automatically. Additionally, if an employee passes away while still working for the company, the death benefit promised is instantly paid to their nominee.
Why Do Organizations Pick Group Insurance?
Companies aware of the hazards their employees may encounter choose a group insurance plan to protect them from difficult times. By investing in group insurance coverage, employers can ensure that their staff need not worry about their safety and financial security. Group life insurance has the following advantages:
- In terms of savings, there is a significant advantage. Purchasing separate plans results in a significantly higher term insurance premium. Purchasing group life insurance is cheaper for the organization.
- A group life insurance policy has several tax advantages. Suppose an employee pays a portion of the plan’s premium. In that case, they can deduct it from the total taxable income under the provisions of Section 80C (Income Tax Act, 1961), lowering their overall tax burden. Additionally, section 10(10D) of the Income Tax Act of 1961 exempts the death benefit payment made to their family after their passing. The provisions listed in the Income Tax Act of 1961 apply to the deductions and exemptions. Please be aware that group insurance policies may contain additional conditions on the aforementioned tax advantages. Before submitting any claims, it is advised that you communicate with your tax advisor to confirm that all other requirements have been met.
- If employees of an organization qualify for group term life insurance, they immediately receive the policies. As per the terms and conditions, they might also get the policies without any medical examinations. This implies that a person is eligible for term insurance simply by being a group member. This feature makes group term life insurance practical.
- No matter how many beneficiaries are included in a group life insurance policy, only one contract—known as the “Master Policy”—is made with the Master Policy Holder (MPH). The MPH then serves as the group’s administrator, coordinating enrollment and member claims with the insurer. Depending on the group policy, the insurer may provide individual members with a Certificate of Insurance, which is a subordinate document to the Master Policy. This makes the maintenance of the policy convenient.
- Some group life insurance plans permit the addition of riders offered by the insurance company, which significantly enhances the life insurance coverage. Organizations can raise the total death benefit sum assured payout with the aid of add-ons such as critical illness riders, accidental death and disability riders, and waiver of premium riders, among others.
- A group life insurance plan makes it very simple to file a claim. The family of a deceased person needs to inform the organization and provide the required paperwork to claim the death benefit.
Group Life Insurance is perhaps the only type of life insurance policy that benefits both the organization and the beneficiaries. Having said that, a group insurance plan would not always be sufficient to give your family ample life insurance protection. You could also buy a standalone life insurance policy in that situation, just in case. Make sure to critically assess your needs before making a decision.