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Group life insurance: How beneficial is it?

March 05, 2017 08:00 IST

Group life insurance: How beneficial is it?

Are all the benefits of group life insurance for real? Naval Goel finds out

Illustration: Dominic Xavier/Rediff.com

Life insurance is a must for everyone these days corporates have taken a step further by collaborating with insurance companies to provide group insurance for their employees; this somewhat guarantees the safety of the employees and the interest of the company too.

But the real question is: is it beneficial?

A group life insurance is a contract that covers the lives of a group of people. Those who apply for group insurance are employees of any company or an entity. The policy is made for the benefit of each person in the group.

The group policy extends to anyone who belongs to the group. The policy is given to people irrespective of their gender, age, profession or social background.

For those who do not have individual life insurance, group life insurance provides relief to them and their families.

Features of group life insurance

The only difference that one can find between group life insurance and personal life insurance is the basic advantages that the former gives to a person. Some of these features are:

Gratuity

As an employee completes five years in a particular organisation, s/he is entitled to gratuity. This option provides the company with an investment option that can help it build funds that can be used to pay off the gratuity amounts.

Superannuation

This serves as a retirement plan for the group. This group plan feature pays the sum assured also known as SA to the family of the particular employee.

Savings

This plan can be used as a way in which the savings of an employee accumulate and keep increasing. This is beneficial, as the employee not only gets life insurance, but also gets to accumulate wealth through savings.

Credit protection

Group insurance is the type of insurance policy that is provided through banks or lenders. The biggest feature of this policy is that it covers outstanding loans in case the employee dies or suffers any disability.

Group life insurance coverage

The minimum age that one needs to attain in order to apply for a group life insurance plan is 18 years of age while the maximum age stands at 69 years. The maximum age at the time of expiry of the plan is 70 years.

The tenure of a group life insurance policy can be as less as an year. The minimum sum assured through this policy is Rs 1,000. This life insurance is only active and valid till a particular individual is part of a group and is terminated once s/he exits the group.

Benefits of group life insurance

The various benefits of a group life insurance are:

Employer benefits

The employer who is the giver of group insurance gets tax benefits and in specific cases, the members of the group can avail tax benefits.

Default insurance cover

The greatest benefit of taking up a group life insurance is that it does not matter if the employee already has an insurance or not. If s/he doesn't have insurance already, then group life insurance acts as a substitute.

Ease in premium payment

The payment of premium for this life insurance is automatically deducted from the salary of an employee so there is no need for the employee to worry about meeting deadlines or missing her/his premium payment.

Some drawbacks of a group policy

Though the benefits of group insurance policy seem to be great for any employee certain drawbacks and conditions are laid down with the issuing of an employee's group life insurance.

The benefits of the group life insurance such as gratuity and superannuation will all be terminated if a particular employee leaves the group. All the benefit come to the person only when s/he is a part of the particular group that is giving the benefits to its members.

If an individual who is under a certain group life insurance happens to come up with any health condition, then the medical costs of the person are not fully covered and buying an individual life insurance at that point of time may be expensive.

A person's life insurance may also not cover fully the pre-existing health conditions of a person. This is the greatest disadvantage of group life insurance.

Naval Goel is CEO and Founder, PolicyX.com

Naval Goel