Group insurance provides coverage for a predetermined group of people, such as members of society, professional organizations, or a company’s workforce. Life, health, or other types of personal insurance may be available through group insurance.
To address the insurance needs of certain groups, including professionals, employers and employees, co-operative societies, and others, most insurance companies in India have created group insurance products.
The main benefit of group insurance is that members are eligible for an insurance policy regardless of their age, gender, socioeconomic status, or occupation as long as they are a part of the group asking for insurance.
Group Insurance From An Employer’s Perspective
Group insurance is now common among corporations and organizations as part of their overall employee remuneration. Many types of group insurance policies cover different aspects of employee benefits, and selecting the right ones can be hugely beneficial for the company and employees.
Although group insurance has many different goals, a group insurance plan serves one or more of the following functions:
- Gratuity – When an employee has worked for the company for a specific amount of years, the employer frequently gives them a gratuity. The firm can accumulate cash to provide employees with a gratuity benefit by purchasing a group life insurance policy.
- Superannuation – During the employee’s retirement period, the sum accumulated through the Group Superannuation system will be paid to them.
- Term Policy – If the participant of a group life insurance plan dies, the sum assured will be paid to the participant’s nominee.
- Group Savings Plan – Group Savings Plans are a tool for long-term wealth accumulation. Additionally, they effortlessly provide life insurance advantages to the workers.
- Credit Protection – Banks and lending institutions frequently choose Group Credit Protection Plans to safeguard their interests. This insurance plan shields banks against the loss if a borrower defaults on a loan due to death or disability.
Typical Advantages of a Group Insurance Policy
Regardless of the type of plan or the purpose, a group insurance policy provides the following advantages to the employer:
- Master Contract – Individuals are automatically enrolled in a group insurance plan under the terms of the master contract. Let us describe its operation. An insurance company will sell a master contract of the group insurance policy to the employer. The cost will depend on how many members there are and how much coverage is provided. The premium will rise proportionally if there is a rise in the number of members. Similar to the above, if employees decrease, the insurance provider will refund the surplus premium. Members will not be required to undergo medical testing, but the insurer will consider the group’s overall health.
- Affordability – Compared to individual insurance policies, group insurance is less expensive. This is because a large number of people are covered by a single policy, which enables the insurer to combine diverse costs, including administration, operation, and renewal.
- Coverage by Default – Members are automatically presented with a group insurance plan. If you are a new joinee in an organization, you will be automatically registered in the group insurance plan to which the company has subscribed. After the new member’s premium has been paid, the insurance coverage can be obtained.
You will continue to receive group insurance coverage as long as you remain a group member. You can also purchase an additional individual policy if it is not adequate. To ensure you have comprehensive coverage, you should carefully review the terms and conditions of the company’s group policy and then decide whether to get an individual policy. If you purchase an individual plan, your coverage is maintained even if you leave the company.
- Easy premium payment – It is pretty simple to pay the premium for a group life insurance plan. Since your premium will be automatically withdrawn from your earnings, you won’t ever forget to pay it. Consequently, both the company and the employees find the payment method quite convenient.
- Effective Fund Management – The group insurance provider’s competent fund managers oversee the funds accumulated by the plan. The employer will be provided with enough money to cover unforeseen expenses. Superannuation, gratuities, and other payouts may be controlled effortlessly with the available financial flow.
- Tax Benefits – In the case of some group plans like group term insurance, the organization can enjoy tax benefits under section 37(1) of the Income Tax Act, 1961. It states that all expenses incurred wholly for the purpose of business or profession can be exempted from the taxable income. The premiums paid towards a group insurance policy can be exempted under this section.
Group Insurance has many benefits for a business, from increased employee satisfaction to affordability to tax exemptions. But most of all, if chosen correctly, these incentives can ultimately boost productivity.