What is group life insurance?
Group life insurance is a type of life insurance policy that covers a group of individuals under a single policy. This type of insurance provides benefits offered by corporations or societies to their employees or members. Group life insurance is a popular policy in India, providing lump-sum life insurance at a very low cost of premium. Typically, in corporations, the benefits of life insurance are categorized based on position or seniority or income of the employee. Group life insurance covers not only the employee or member but also their family members, including the employee's spouse, children, and parents. Taxpayers can claim tax benefits on the premium paid when filing their income tax returns. Companies with 25 or more employees are eligible to apply for group life insurance.
Some
are the key features of Group life insurance:
Coverage:
Group life insurance
policies provide insurance coverage to multiple individuals, including
employees in corporations and associations. The coverage amount is either fixed
for all individuals or chosen by the employer based on income of the employee
or member.
Premium
of Group Life Insurance:
Group life insurance
premiums are significantly lower in cost compared to individual life insurance
premiums. Organizations typically pay the premiums directly, although sometimes
they may be deducted from employees' monthly salaries.
Term
Period:
The term period of the
group life insurance policies are one year, every year the corporates or
societies need to be renew it.
Tax
Benefits:
Premiums paid by the
employer or member for group life insurance can be shown as a business
expenses, even individual member can claim for tax benefit under section
10(10D) of the Income Tax Act, 1961.
Insurance
Limit: There are no maximum limits in group life insurance,
usually depends upon the annual income of the employee or member.
Benefits: In case of untimely death of the employee or
member during the policy the beneficiaries or nominee or the corporates,
organisation, society receive the death benefit. This can provide financial backup to the
employee’s family.
Medical
Examination:
In group life insurance an individual may not be required any medical
examination or no need to provide any medical reports.
In short group life
insurance gives financial protection to employee and their family at a very low
cost premium. It is always better to understand all its terms, insurance limits
etc., while going for group insurance policy.
Example:
XYZ Solution Limited is
a manufacturing unit, there employees are working or operating heavy machineries
to see the risk factor, company management has decided to give life insurance
coverage to all their employees as part of employee benefits package and to
provide their family financial backup, in case the unfortunate and untimely
death of employee. So the company
approach to the insurance company for group insurance policy for their
employee.
Following
is the example of one of the employee, his name is Rajesh.
Enrolment: Since Rajesh is a permanent employee of XYZ
Solution Limited he is eligible for the group life insurance benefits. He needs to simply fill the form with
necessary paperwork to be a part of Group life insurance policy.
Sum
Insured: XYZ Solution Limited chooses the basic level of
coverage amount to all the employee, it is the two times of Rajesh’s annual
salary. If Rajesh wants to increase
coverage amount, he has to pay a separate certain amount to the company, it
will deduct from his salary.
Premiums:
Group life insurance premium is very low and directly paid by company, in case
Rajesh wants to increase coverage amount, the company will deduct from his
salary.
Nominee
or Beneficiaries: Rajesh might choose his parents, spouse
or children as a nominee or beneficiary, who will receive the death benefit in
case the Rajesh passes away during the policy.
Convertible: Group life insurance policy is a convertible,
in case Rajesh leaves the XYZ Solution organisation; he may have option to
convert his policy to an individual policy.
Benefits: During the employee of the company or policy,
if Rajesh pass away, his nominees or beneficiaries would file claim with the
insurance company.
