A Group Insurance policy gives the same insurance coverage to all its members present in a group, regardless of their age, gender, occupation, or socioeconomic background. The set of people insured by a single insurance policy is collectively referred to as the ‘Group’.
Group Insurance reduces the need for each member to purchase an individual insurance plan. As part of payment benefits, the employers frequently provide their employees with a Group Insurance plan. This plan covers set members and their spouses, children and parents.
What are the Types of Groups?
The groups can be broadly classified into two types:
Formal Group (employer-employee type)
Members of professional organisations, businesses, and other organisations fall into the category of a formal group. In this case, the employer purchases the insurance policy that covers the members of that organisation. The staff is the “most valuable asset” to an employer.
In today’s fast-paced work world, one would want to ensure recruiting the greatest talent and retain them as long as possible. In order to accomplish this, it is critical to provide the employees with rewards that demonstrate employers’ appreciation for their dedication and devotion to their work.
With a Group Insurance plan, employers can provide unique employee retention strategies that meet their employees’ protection and saving needs. These plans enable employers to provide financial stability to their employees and their families. These plans also assist their employees in meeting their post-retirement demands. Furthermore, one can earn higher returns on various statutory obligations, including gratuity.
Informal Group (non-employee-employer type)
Members of the same credit card company, members of the same cultural or social organisation, etc., are examples of informal groups. The group admin purchases the policy that covers the organisation’s members. As a group leader of a non-employee-employer group, one would want to protect the organisation’s members and their dependents. In the case of financial entities such as banks, one would want protection against obligations related to credit cards or default in payments of loans.
Types of Group Insurance Policies
Numerous Group Insurance policies are accessible in India, ranging from health to term life insurance. Broadly, there are two categories of Group Insurance plans:
- Non-contributory Group Insurance plans: In this form of Group Insurance plan, group members or workers don’t have to pay a premium to receive the policy’s benefits. A non-contributory Group Insurance plan, for example, means that the employer will bear the premium cost of the employee’s insurance.
- Contributory Group Insurance plans: As the name implies, it is a type of Group Insurance plan in which the group members pay the premium (in part or in full) to receive the policy’s advantages. Some employers, for example, might remove a percentage of an employee’s insurance premium from their pay.
Important Aspects of Group Insurance Policy
- A Group Insurance policy provides a standardised coverage at competitive premium prices because the risk is dispersed across many people. This ensures that all group members have the same level of coverage.
- Group Insurance policies cover all members under the same plan regardless of size.
- A group can include both employers and employees, as well as non-employers and employees, as mentioned earlier.
- The group leader receives a master policy in the name of the group.
- Premium is either levied to members or is paid for by the group.
- As long as a member is a part of the organisation, he is protected. If a member of the clan leaves, the cover ends.
Benefits of Group Insurance Policies
Today, many corporations and businesses want to provide Group Insurance to their employees as part of their overall pay. The following are some of the benefits of a Group Insurance plan for both businesses and employees:
- The premium for Group Insurance is lower than the premium for an individual plan for a member. As the risk is spread across all group members, these policies lower the insurance provider’s obligation.
- Because the employer frequently pays premiums, Group Insurance is a practical approach to insure all employees with varying income levels. This brings a sense of equality and provides a cost-effective way for employers to give insurance coverage to their workers.
- Workers are more loyal to their employer when they have Group Insurance. A group member feels valued and is motivated to work within the same group. Furthermore, these plans assist the organisations in creating a pleasant, employee-friendly work environment.
- A Group Insurance plan frequently covers immediate family members of group members. Many group health insurance policies, for example, cover a group member’s spouse, children, and parents.
- When filing their ITs, group members can claim tax breaks on the premium amounts they paid for Group Insurance. Employers can also claim tax breaks for paying premiums on insurance policies for their employees.
- Group Insurance provides uniform coverage for all members. It enables persons with lower incomes to obtain the same level of coverage as those with higher incomes.
- When a group member leaves, several group policies can be converted into individual plans. Under such a situation, the member must pay a one-time conversion fee.
- Pre-requisite criteria are not required of group members.
A Group Insurance policy is an intelligent and practical way to cover all group members under the same plan. Individual members as well as the group as a whole benefit from such a plan. It helps the organisation and its people to develop a strong work mindset with a renewed positive approach.