Life Insurance

Group Life Insurance

Group Life Insurance

Gone are the days when we used to work long hours a day, along with the time and effort to commute to the workplace. Now we have evolved into a scenario of workspaces that offer work-from-home, work-from-the-office, and hybrid opportunities. These efforts are made with the aim of employee welfare - to make work comfortable.

One such perk that companies, banks, and other institutions have to offer is life insurance. The various features it provides can be beneficial to your family’s financial stability when something unfortunate happens to you. Let us know more about it!
 

What is A Group Life Insurance Policy?

A group life insurance policy offers collective coverage to a group of individuals, in contrast to individual life insurance - which only caters to one person.

The group can contain any number of people but has to share a common affinity. For instance, members of a club/association, employees of an organisation, account holders of a bank, etc.

There are several types of group life insurance schemes available today. For instance, a group term life insurance plan will pay the nominee of the deceased member a lump sum amount if he/she passes away during the policy term. Then, a group Pension/Superannuation insurance plans are offered by an employer and cater to an employee’s retirement needs. The funds invested in this plan grow over a long period (during employment) and the employee can enjoy a heft savings fund when they retire.
 

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How Does A Group Life Insurance Policy work?

A group life insurance policy is classified into two - Contributory and Non-Contributory.

  • Contributory Group Life Insurance
    In contributory group life insurance plans, the group members contribute either a portion or the complete premium. For example, some employers deduct a percentage of the employee’s salary to pay for the premiums of a group life insurance policy.

  • Non-Contributory Group Life Insurance
    In non-contributory group life insurance plans, the group members do not have to pay anything to enjoy the insurance coverage. For instance, an employer may consider group life insurance as a welfare scheme and pay the premiums for all employees themselves.

    Basically, a group life insurance policy is managed by the group administrator or the master policyholder (employee, bank, or organisation). Here, the insurance company issues the policy to the master policyholder who then provides the coverage to all the members of the group.
     

Eligibility Criteria for A Group Life Insurance Policy

  • Basic Requirements
    Let us start with the fundamental requirement of being a part of the group to be eligible for the policy. The group must have the sole purpose of buying the insurance policy. Depending on the insurance providers, additional conditions related to group size, entry age, etc., may follow.
     
  • Entry Age
    The entry age for all insurance companies is a minimum of 18 years. However, the maximum entry age requirement may vary from insurer to insurer. Some providers may lay down an entry age of 65 years, while others may lay down 70 years, 80 years, 85 years, or more.
     

Advantages of A Group Life Insurance Policy

Some features of a group life insurance policy have been listed below:

  • Affordability
    A key feature of group life insurance is affordability. These plans cost less than multiple individual covers for the same number of people, simply because a large number of people are included under a single cover.
     
  • One Year Contracts
    All group life insurance policies are contracts for a year. Every year, the pricing and terms may be revised by the insurer, depending on the number of claims received from the group.
     
  • No Medical Tests
    The policy has a simpler and hassle-free application process compared to an individual insurance policy. Generally, a group life insurance policy does not require any medical tests.
     
  • Quick Issuance
    It takes very less time to get covered under a group life insurance policy. In most cases, it may happen instantly or within 24 hours!

Best Term Life Insurance Plans

 

Drawbacks of A Group Life Insurance Policy

  • Little Or No Control Over The Policy
    When it comes to an insurance policy, it is recommended that you choose or customise it based on your needs. But in the case of group life insurance, the employer, bank, or organisation have complete control over policy management. This leaves you with limited or no control over customisations and policy terms.

  • Coverage And Membership Are Interrelated
    The policy’s benefits are applicable only if you are a continued member of the group. If you leave the organisation that offers the policy or close the bank account, you will lose life insurance coverage.

  • Low Coverage
    In a group life insurance, negotiations happen between the master policyholder and the insurer. The group will buy a policy that fits their budget rather than considering your and your family's financial needs. This might result in low coverage that won’t be sufficient for you or your family.
     

Conclusion

A group life insurance policy comes with its own benefits and limitations. We hope this article helped you gain some insight into what it is, how it works, its types, and the various drawbacks it has.