What Are The Benefits And Features Of Group Life Insurance Policies?

Life insurance plans have evolved to offer various forms of protection and coverage suited to different groups of people. One such option is a group life insurance policy, which provides financial security to multiple individuals under a single plan. It helps organisations, associations, or groups ensure that their members’ families are financially protected in case of any unfortunate event. Group life insurance is not limited to employees of a company but can also extend to members of professional or welfare associations. In this article, we explain what a group life insurance policy is, along with the benefits of group insurance and its features.
 

What Is A Group Life Insurance Plan?

A group life insurance plan provides life cover to multiple individuals under a single master policy. It is commonly offered by employers, professional groups, or financial institutions to protect their employees, members, or borrowers. In case a covered member passes away during the policy term, the nominee receives a financial payout. The coverage can be uniform for all members or vary based on factors like salary or designation. Cost-effective and simple to manage, group life insurance is often used as an employee benefit to offer financial security and peace of mind to the workforce.
 

Benefits Of Group Life Insurance

Purchasing the group life insurance plan is beneficial for the group leader and the members of the group for the following reasons:
 

• Single coverage: The group life insurance death benefits apply to every single member of the group. Therefore, every member is a beneficiary of the life insurance coverage under a single common life insurance plan. The coverage is common irrespective of factors such as the members' age, gender, lifestyle, etc.
  
  
• Financial protection for the members' families: The group term life insurance benefits the families of the members. In the unfortunate event of a member’s death, the nominee receives the death benefit as a lump sum. This financial support helps the family manage expenses and reduce their financial burden during a difficult time. It provides a sense of security for the member’s dependants.
  
  
• Affordable: As the coverage is extended to a group of people, the premium becomes increasingly affordable. Therefore, it is accessible for people irrespective of age, gender, socio-economic status, lifestyle, etc. And suppose an employer provides the group life insurance policy as an employment benefit. In that case, the employer generally pays the entire or the major portion of the premium for the insured employees.
  
  
• Gratuity and superannuation benefits: The employer can purchase group insurance based on a gratuity scheme to provide gratuity benefits to the employees based on their years of service in the organisation. On the other hand, group insurance based on superannuation benefits helps the employer accumulate funds to provide for the employees on their retirement.
  
  
• Credit protection for lenders: Group life insurance also safeguards financial institutions and lenders. If a borrower passes away before repaying a loan, the insurance coverage helps settle the outstanding amount. This ensures lenders do not face financial losses due to unforeseen circumstances.
  
  
• Default coverage: New employees or members are automatically covered under the policy once they join the organisation or group. This ensures uninterrupted protection from day one, with the employer handling any necessary additions or premium adjustments.
  
  
• Employee retention: One of the most important group life insurance benefits is employee retention. When group life insurance is provided as an employment benefit, it increases the morale among the employees, making them feel more secure and reducing the employee attrition rate.
  
  
• Hassle-free process for the members: The employees or the members are not generally required to undergo a medical screening process to avail of the group life insurance benefits. In addition, the claim settlement process for the nominee based on the group life insurance coverage is simple and hassle-free compared to purchasing individual life insurance plans.
  
  
• Tax* benefits: The premium paid by the employer for the benefit of the employees is considered a business expense under Section 37(1) of the Income Tax Act, 1961. And if the employee contributes to the premium, the payment will qualify for a tax* deduction under Section 80(C). Furthermore, the life insurance plan payouts will qualify for a tax* exemption under Section 10(10D) of the Income Tax Act 1961.
  
  
• Experienced fund managers: Employers also gain access to expert fund managers who help manage schemes like gratuity and superannuation. Their expertise ensures optimal fund allocation and long-term financial stability. This adds professional oversight to employee benefit management.
   

Features of Group Life Insurance

The group life insurance benefits are based on certain features that define the terms and conditions of the policy.
 

• The master contract: In a group life insurance plan, the employer or group organiser buys a single master contract that covers all members under one policy and is responsible for making the premium payments regularly. The premium will be based on the number of members and the coverage amount. If the number of members increases, there will be a corresponding increase in the premium. The master contract will be issued to the sole policyholder detailing the persons covered, terms and conditions, and the benefits of the group life insurance.
  
  
• Contributory and non-contributory insurance: In a non-contributory group insurance plan, the employer fully sponsors the policy as an employment benefit, requiring no contribution from employees. Conversely, in a contributory plan, employees pay a small portion of the premium while the employer covers the remaining amount, ensuring shared financial responsibility.
  
  
• Coverage period: The life insurance cover remains active for members as long as they are part of the group. It automatically ends when they leave, such as upon resignation or retirement from the organisation.
   

Conclusion

Group life insurance plans offer a convenient way to provide financial protection to a group of people under a single policy. They are suitable for both employer-employee and non-employer groups, helping ensure that members’ families receive support in case of unforeseen events. These plans are generally affordable, easy to manage, and beneficial for both organisations and members. By covering many individuals together, group life insurance helps promote a sense of security and collective well-being within the group.