What is Group Insurance and Who can Purchase One?
In simple words, a group insurance plan is designed to meet the insurance needs of a particular group of people. Apart from life cover benefits, such plans also come with a host of other benefits that help meet the needs of the insured, while they are alive and those of their loved ones after their demise. While group life insurance plans can be purchased by different groups of people, usually, such plans are purchased by employers and associations to insure their employees and members.
For instance, employers who wish to help extend a financial safety net for their employees- to either make their package more attractive or improve employee morale- can opt for affordable group insurance policies that also come with tax rebates as per applicable tax laws. Under the purview of such plans, the contribution is generally made entirely by the employer, while employees may be given an option to voluntarily contribute to the same. However, these specifications will be based on the terms and conditions of the policy in question.
What are the Advantages of a Group Insurance Policy, under Employer-Employee Scheme?
1. Affordable Comprehensive Covers -
Group insurance policies provide comprehensive life cover against a nominal premium amount that’s usually covered by the employer. This makes group insurance policies for employees an advantageous safety net.
2. No Prerequisite Screenings -
Pre-requisite screenings would depend on the type of plan. For a Group Term Life - Employer Employee scheme it will not apply till the agreed Free Cover Limit. However, for a Non Employer Employee it would depend on the arrangement at the time of policy commencement. The Free Cover Limit may or may not be provided, depending on pricing.
3. Improves Employee Retention -
One of the formula for employee retention is quite simple – the more attractive the benefits in a package, the more likely your employees will remain loyal to the organisation. While there are various ways of boosting employee morale and retaining talent, a group life insurance plan remains one of the tool for achieving this goal.
4. Affordable Premiums -
Group insurance policies for employees prove to be both a prudent and cost-effective option for employers. Since group life insurance plans use cumulative risk calculation to ascertain premium rates, these are generally more affordable.
5. Tax Benefits -
Tax rebates happen to be one of the significant benefits of group insurance plans. Under the Income Tax Act of 1961, the contributions employers make towards such plans are considered tax deductibles. Similarly, if employees decide to make voluntary contributions to the plan, employee can claim deduction under Section 80C of Income Tax Act 1961 subject to satisfaction of conditions mentioned therein.
Types of Group Insurance Plans
Given the myriad benefits of group insurance policies, they are not just popular among employers, but also happen to be quite prudent insurance options for banks, professional associations, housing societies, etc.
While group insurance plans can be broadly classified into employer-employee or non-employer-employee plans, there are sub-categories to these. Here are some of the most common types of group insurance plans that cater to the varied insurance needs of these different groups of people:
Group Superannuation Plan –
These group insurance policies are essential for post-retirement financial safety nets. With a superannuation plan, you get to plan for income after retirement. You can enjoy regular monthly benefits after attaining the set retirement age. The payout from such plans can help cover medical, rent, or other expenses that might arise after retirement.
Group Term Policy -
A group term plan offers life cover to each member of the insured group. The death benefit payout from the plan is received by the nominee of the deceased member in the event of the individual’s untimely demise during the policy tenure as per policy terms & conditions.
Conclusion
Apart from boosting employee morale, group insurance plans also act as one of the affordable insurance options. Given their versatile character and the myriad of advantages they offer, group insurance plans are not just preferred choices for employers, but also for employees
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