Features and Benefits of Group Life Insurance

It is an exciting moment when you land a job in a new company. It is your first day when you're busy doing some formalities, the HR hands over you a group life insurance application form. You may be wondering what exactly the policy is and how it is going to benefit you.You may be aware that there are individual life policies, which you purchase voluntarily. Similarly, large and medium-sized organisations and companies also cover their employees under a single master policy, known as Group Life Insurance Policy . Usually, a group life insurance restricts coverage only to you, your spouse, and your child, if any.However, some policies allow you to extend the cover to include your parents as well. Let's get to know what the features, benefits, and drawbacks of the policy are.

Irrespective of the age, profession, and social background, employers cover all its employees under a group life insurance plan . Below are some of the benefits of the policy:

• Term Policy In case an employee dies in an unfortunate incident, the group life insurance pays sum assured amount to the nominee as chosen by the deceased person.
• Employee Cover by Default The insurance cover is an added advantage, which is part of the employee benefits package. Once you are selected to be part of a company, you're by default enrolled in the plan. Some companies allow you to buy an additional individual plan and the group policy so that whenever you decide to leave the organisation, the individual policy will continue operating.
• Premium Payment In some cases, the employer pays the premium of the group life insurance plan. In either case, the employee bears the premium cost that gets deducted directly from the salary.
• Seasoned Fund Managers There are experienced fund managers who manage the fund accumulated under the Group life insurance policy . If there are any emergencies, the employer is provided with adequate funds. Fund managers help the employer to manage superannuation, gratuity, and other payouts.
• Gratuity Benefit Under this, you, as an employee, receive gratuity benefits for completing a certain number of years with an organisation. Group life insurance helps an employer to accumulate funds so that employees can derive gratuity benefits.
• Credit Protection Banks and lending agencies often have to suffer a huge loss if an insured person dies with an incomplete loan liability. In such a situation, the banks can opt for a Group Credit Protection Plan to protect themselves from the loss.

• Master Contract The Group life insurance policy is an insurance cover that is offered to the employees by default, whether you have an insurance cover or not. It is a master contract where an organisation purchases a master policy where the premium depends on the number of members and the sum assured amount chosen by the company.The premium has a proportionate effect on the number of members. If the members increase, the premium rate also increases, and vice versa. However, if the insurer receives any excess premium amount, it refunds the same to the organisation. This is how the master contract works.
• Contributory and Non-Contributory A group life insurance can be set up in two ways – Contributory and Non- Contributory. In the former plan, the employee contributes to the policy by paying a part of the premium, and the employer bears the rest. In the latter, the premium is wholly paid by the employer itself.
• Affordable As compared to individual plans, group life insurance is less expensive. This is because the insurance company can club various expenses such as administration, operation, and renewal under one master policy.

Some employers offer group life insurance policy that provides coverage only to the employees. It does not cover your spouse and children. In such a case, it is necessary to re-evaluate the policy so that you can purchase a separate insurance cover that protects your dependent family members.Group life insurance policies are valid till the time you're associated with the company. The insurance cover ends as soon as you leave or quit the organisation. Some public sector companies continue offering the cover even when an employee has left the organisation.Safeguarding employees with a Group Life Insurance Policy is one of the biggest benefits offered by employers as it helps to retain employees for a longer period. However, one shouldn't entirely depend on the insurance cover as it may be insufficient for you, your spouse, and your child. Therefore, it is always advisable that you buy a separate family insurance that will provide more benefits and coverage to you and your family.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.