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What are the Conditions for a New Employee to be covered under Group Term Life Insurance of the Employer?


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Sep 08, 2022

By : Bajaj Allianz Life

When new employees join a company, employers offer group term life insurance as a benefit. The policy gives employees assurances that in the event of the unfortunate demise of employees, during the course of employment, beneficiaries (families) of employees will remain financially secure. There exist certain conditions of coverage under a group term insurance policy when an employee is new.

 

Conditions for New Employees to be covered under Group Term Life Insurance of the Employer

 

When an employer is in the process of buying group term life insurance for employees of any company, insurance companies account for all the present employees working in the company. In cases where additional employees join the company, there are specific conditions that apply with regard to group term life insurance, detailed below:

  • Under any group term life insurance plan of a company, employees have to fulfil certain eligibility criteria to be covered by the plan.
  • The cover from a group term insurance plan begins from the date of entry of the name of the employee in the register of the company. This information is conveyed to insurers, so they can make a note in their records.

If an employee needs to be added to a group term insurance plan between two renewal dates, the employer must send the insurance company information about the new employee every month.

To extend insurance cover for new employees, the employer must pay the premium proportionately for the remainder of the year to which the policy tenure applies. After a new employee is incorporated in a group plan, it is the duty of the given company to inform the new employee of the insurance plan and benefits involved.

When all the relevant details of any given employee are received by the insurer, the insurance coverage of the employee is issued in the policy. It is important to note that with group term life insurance, companies offer varied assured sums to employees. These are based on distinctive employee salaries and job profiles. For instance, in case a company has manual labour and white-collar employees, the company may offer different plans to each of these groups based on employee profiles and salaries.

 

A Case Explained

 

The case study mentioned below will help to get a better grasp of how conditions for new employees apply with a group term insurance plan:

Since the year 2000, BD Constructions has gained a name to contend with in the construction business. The company offers its employees many benefits. In addition to these benefits, the company also provides its employees with group term life insurance. The company comprises both labourers and white-collar workers, being a construction company. In an effort to provide financial security to all its employees, BD Constructions has purchased group term insurance plans. The company has bought separate plans for each category of employees, but from a single insurance company.

While one plan of group term life insurance has a cover amounting to Rs. 50 lakh, the other has a cover that amounts to Rs. 10 lakh. When the company initially purchased group insurance, it had a hundred employees. Now, with expansion, the company has two-hundred employees. Whenever a new employee joins BD Constructions, the HR department gives this information to the insurer. In the past year, ten new employees joined BD Constructions. Out of these, two employees belong to the top managerial levels and were entitled to group insurance. The insurance company incorporated them into the policy after their details were submitted. The eight other new employees were labourers, and they were included in the other group policy according to their employment profile.

As new employees joined the company, mid-way through the policy tenure, the company had to pay a premium commensurate with the remaining policy tenure and the cover for new employees.

 

Conclusion

 

Group term insurance is a benefit that employers give employees today. However, while this definitely helps an employee, as one gets additional financial protection. The costs of services and products are high, and inflation is rampant. To meet these costs, one may also need individual life insurance policies and health insurance plans.

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The above information is for general understanding and is meant to educate the general public at large. The reader will have to verify the facts, law and content with the prevailing tax statutes and seek appropriate professional advice before acting on the basis of the above information. 

The views stated in this article is not to be construed as investment advice and readers are suggested to seek independent financial advice before making any investment decisions. For more details on risk factors, terms and conditions please read sales brochure & policy document (available on www.bajajallianzlife.com) carefully before concluding a sale.