Understanding the Different Types and Benefits of Group Life Insurance Policies   

Group Life Insurance policies are purchased by organisations to provide insurance cover to their employees. Such policies are not only affordable for organisations but are also cheaper than buying policies individually. Under the Miscellaneous Provision Act of 1952, the Employees’ Provident Fund Organisation (EPFO) has mandated that all employers should offer life insurance coverage for their employees.

Any organization looking to buy online life insurance for their employees can select from the five types of group plans available for them.

Five types of Group Life Insurance plans in India:

  1. Group Term Life Cover:

This is the term plan offered to the group members and, in some ways, works like an individual term life insurance policy. Some of the features of the group term life cover include:

    • Low premium costs 
    • Zero Maturity value
    • Death, disability/dismemberment advantages 
    • No medical examination when signing up for the plan.
  1. Group Unit Linked Insurance Plans (GULP):

These plans are similar to ULIPs and offer the dual advantage of investment along with insurance cover. A part of the premium is used for providing life cover, and the remaining amount is invested in the market. The plan members can opt from a wide range of equity and debt-based funds for investing in the premium.

  1. Group Pension or Superannuation Plans:

These plans are designed to assist employees in creating their retirement corpus. They are considered an alternative for other retirement plans like NPS and EPF. The funds invested in these plans will grow over a long period and help the employees benefit from the corpus when retiring. 

  1. Group Employee Deposit Linked Insurance (EDLI):

This plan is provided as a part of the Employee Provident Fund (EPF). The advantages of the plan vary according to the PPF contribution made by the employee. As of now, these plans offer disability/death benefits up to 6 lakhs for the members. 

  1. Group Personal Accident Insurance:

Such plans are similar to personal accident plans, with the difference being that they are offered to a group of individuals. The coverage takes care of the medical or hospitalisation bills, partial or permanent disability, or death of the members covered under the plan. 

Group Life Insurance schemes in India can be classified into two types:

  • Contributory: The group members will pay the premiums either entirely or partially for obtaining the benefits of the cover. For instance, some companies will deduct a specific amount from their employee’s salary to pay for the premium.
  • Non-contributory: The group members do not have to pay anything to get the benefits of the insurance plan. Only the employer pays the premiums. 

Benefits of Group Life Insurance Policies

Life insurance companies provide the group life insurance plan for any group of individuals, regardless of their profession, social background and age. Apart from employers, members of employee welfare associations, professional associations or customers of a financial institution can also opt for group life insurance plans. Some of the advantages of group life insurance policies are:

  • Gratuity:

When an employee completes a specific number of years with a company, they generally get gratuity benefits from their employers. With the help of a Group life insurance policy, the employer can build wealth to provide the gratuity benefit to the employees.

  • Credit protection:

Many lending agencies and banks opt for group credit protection plans to protect their interests. If a customer cannot repay the loan because of either disability or death, the insurance plan will cover the bank against the loss. 

  • Superannuation:

The amount invested in the group plans during the policy tenure is paid to the employees during their retirement. This group pension plan helps the employee accumulate a retirement fund as with the National Pension Scheme or Employee Provident Fund.

  • Default coverage:

The group insurance plan is provided to an employee as soon as they join the organization. Since their starting date, they will be included in the group insurance plan the organization is using. After the premium payment for the latest addition to the plan has been made, they can use the insurance coverage.

  • Efficient fund management:

The fund gathered by the group insurance plan is managed by experienced fund managers from the insurance provider. The employer receives sufficient funding to take care of different emergencies. The gratuity, superannuation and payouts can be easily handled with the cash flow available.

 Summing Up

Through a group insurance policy, an employer ensures the safety of their employees so that they can work effectively without worrying about insurance coverage. However, individuals must not rely on group plans for protection. One should also purchase individual plans from reputed insurers who have a decent claim settlement ratio