The benefits of group life insurance for every business
August 24: Of the many factors that contribute to the performance of a successful business, its employees and their happiness are perhaps the most important. Workplaces will always have a productive environment as long as people are happy with their job and their employer.
Employee satisfaction is influenced by a wide range of things, such as financial stability, variety of responsibilities, career advancement, and recognition. Group insurance coverage helps meet employees’ need for financial security. Therefore, as an employer, you can choose from various group life insurance plans to protect your employees’ loved ones against certain unforeseen life events.
Regardless of age, sex, socio-economic status or profession, all employees covered by a group insurance contract benefit from several advantages, including life insurance. Group life insurance is one of the essential benefits that all organizations and businesses should offer their employees.
What is group life insurance?
As the name suggests, a group life insurance plan provides life coverage to a group (formal or informal) of people. It is essentially group life insurance, as opposed to individual life insurance. Businesses, associations or corporations usually purchase group life insurance plans to provide their employees or members with life insurance coverage.
How does group life insurance work?
Although group life insurance is comparable to a standard life insurance policy, there are some key differences.
For example, in the case of a company, the employer would purchase group life insurance to provide life insurance coverage to its employees and would be responsible for paying the premiums. But in some cases, the employer and the employee can each contribute a part of the premium.
Second, the company chooses the amount of death benefit insured for each employee under a group life insurance plan. The employee’s income often determines the death benefit. Employees can choose to increase their coverage in certain group insurance policies. However, this could result in increased premiums, which the employee would then be responsible for paying.
Finally, a group life insurance policy for employees only covers them while they work for the company. Thus, when they leave the group (the company) or retire, the cover automatically ceases. Additionally, if an employee dies while still working for the company, the promised death benefit is immediately paid to their nominee.
Why do organizations choose group insurance?
Companies aware of the risks their employees may face choose a group insurance plan to protect them in difficult times. By investing in group insurance, employers can ensure that their staff does not have to worry about their safety and financial security. Group life insurance has the following advantages:
● In terms of savings, there is a significant advantage. Purchasing separate plans results in a much higher term insurance premium. Purchasing group life insurance is cheaper for the organization.
● A group life insurance policy has several tax advantages. Suppose an employee pays part of the plan premium. If so, they can deduct it from total taxable income under the provisions of Section 80C (Income Tax Act 1961), reducing their overall tax burden. In addition, Section 10(10D) of the Income Tax Act 1961 exempts payment of the death benefit paid to their family after their death. The provisions listed in the Income Tax Act 1961 apply to deductions and exemptions. Please note that group insurance policies may contain additional terms on the aforementioned tax benefits. Before submitting any claim, it is advisable to contact your tax advisor to confirm that all other requirements have been met.
● If an organization’s employees are eligible for group term life insurance, they receive the policies immediately. According to the terms and conditions, they could also get the policies without any medical examination. This implies that a person is eligible for term insurance simply by being a member of a group. This feature makes group term life insurance practical.
● Regardless of the number of beneficiaries included in a group life insurance policy, only one contract, called “Master Policy”, is concluded with the Master Policy Holder (MPH). The MPH then serves as the group administrator, coordinating member enrollment and claims with the insurer. Depending on the group policy, the insurer may provide individual members with a certificate of insurance, which is a document subordinate to the main policy. This makes it easier to maintain the policy.
● Some group life insurance plans allow the addition of riders offered by the insurance company, which considerably improves the life insurance coverage. Organizations can increase the total amount of insured death benefits with options such as critical illness riders, accidental death and disability riders, and waiver of premium riders, among others.
● A group life insurance plan makes it much easier to file a claim. The family of a deceased person must notify the organization and provide the required documents to apply for the death benefit.
Group life insurance is perhaps the only type of life insurance policy that benefits both the organization and the beneficiaries. That said, a group insurance plan would not always be sufficient to provide your family with sufficient life insurance protection. You can also purchase a standalone life insurance policy in this situation, just in case. Be sure to critically assess your needs before making a decision.
(Disclaimer: The above press release is provided to you under an agreement with PNN. PTI takes no editorial responsibility for it.)