How Does Group Insurance Work Under The Employer-Employee Scheme?

A group life insurance plan is a plan that gives life insurance coverage to a group of people through a master policy. Some employers give their employees a benefit in the form of a group plan, which is set out in a single contract. According to terms and condition of the group plan, in most cases, the employer or any administrator of a group is responsible for paying the premium.

If any member of the group is affected in an accident or an event that is covered by the plan, that person can file a claim with the insurance company through the employer or plan administrator (Master policyholder). If a person leaves a group, like when an employee leaves a company, the cover is discontinued.

How does Group Insurance Cover Work?

Since group insurance is a kind of insurance that offers coverage to a number of people in a single contract, the governing contract is known as the “Master Policy” which is a singular contract entered into with the Master Policy Holder (MPH). The MPH is thereafter the administrator of the group, who co-ordinates with the insurer in respect of enrolment and claims of members. Under an employer employee scheme, when a new employee joins an organisation, the employer includes the employee in a group insurance plan, the case of a company, as companies may be very large with several departments, group insurance policies may be segregated, offered according to hierarchical structures of any organisation or the designation of employees.

Group life insurance works in such a way as to offer coverage to employees. It is a benefit that employers may use to attract talented candidates and can be considered as one of the ways to retain them for a long term. As far as employees stays with the employer; the benefit of life insurance gives their nominee(s) (who may be family members) an assured sum in case of any unfortunate event (covered under the group scheme) like demise of the employee. Thus, it offers an employee financial protection to a large extent. Group insurance plans offered by companies usually offer base coverage for which premium is paid for by employers. In case employees wish to top-up the coverage, they can do so by paying additional premium, provided the Master policy agreement includes this option.

An Illustration on Group Insurance Cover Conclusion

Steelman is a manufacturer that produces steel. The management of Steelman has decided to offer a life insurance policy to each of its employees as a benefit. Instead of opting for individual policies, the management has decided to sign up for group life insurance. The main reason for this company to opt for a life insurance plan is due to occupational risks while working in the steel factory with boilers and machinery.

The management of Steelman contacted a life insurance company to purchase a plan with appropriate coverage. The insurer requested information pertaining to the extent of the cover that was required. Additionally, the insurance company asked the management of Steelman to determine every employee’s cover according to the salary earned. The total coverage for all employees was computed, and based on this, a suitable premium quote was given to the management of Steelman. Added to this, the insurer included various terms and conditions according to coverage. These included the conditions for the settlement of claims, rider details, etc.

The company paid the premium for the plan, and the insurer issued a master policy document to be maintained in the company’s records

Conclusion

Group life insurance is a preferred way to provide employee benefits by employers. One of the reasons that prospective candidates accept employment offers, besides compensation, may be the benefit plan offered by the company. In the unpredictable world we live in, employees need some amount of financial security to protect family members in case of their absence. In several cases, employees are the sole bread earners of their households, and in the event of unfortunate events, dependents may find themselves at a loss, both emotionally & financially. A group insurance plan helps give employees the peace of mind that loved ones will be taken care of in such circumstances

Some group insurance plans come with riders that include critical illness cover for employees at extra cost. With such plans, the insurer pays out a lump sum benefit as per rider conditions if a critical illness diagnosis of an employee is made during the plan’s tenure. Such advantages of group insurance plans appeal to employees, and employers get the benefit of retaining a solid employee pool.

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