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There is strength in numbers, even when it comes to insurance. Through a group insurance policy, such as a group life insurance policy, health insurance policy, etc., one plan can cover all members of a certain group under similar terms. Insurance companies have developed group insurance schemes to cater to the needs of various groups of people who adopt this shared model of insurance for different purposes.
For instance, in employer-employee relationships, group insurance is offered as a service benefit coupled with other benefits. In non-employer-employee relationships, group insurance typically ensures that all members of the group enjoy the benefits of basic insurance coverage.
Group insurance is an insurance type under which the coverage of a single insurance plan extends to all the members of a certain group. Since the insurance coverage and terms are generally standard for all the members of the said group and the risks against which insurance is offered are the same, it can mitigate the need for the members to obtain individual insurance plans for the same purposes.
In the context of group insurance schemes, a “group” means a group of people who have come together for a common purpose or to engage in a common economic activity. This includes formal groups, such as employee-employers, and informal groups, such as an employee welfare association, associations, societies, etc.
However, people who come together for the sole purpose of availing group insurance schemes will not be considered a group for this purpose. The relationship between the member and the group manager or organizer must demonstrably be for purposes besides obtaining insurance.
Group insurance plans are based on the characteristics of the group as a whole, and the risk is evaluated accordingly. A master policy is issued to the policyholder detailing the persons covered, the benefits, the terms, etc.
The terms of a group insurance policy apply to all the members of the group, and all of them will be the beneficiaries of the coverage under a single policy.
The premium rates are lower and more affordable because the risk is widely distributed among the group members. This makes group insurance accessible and affordable for people regardless of their gender, age, income, socio-economic status, etc. When it is offered as an employment benefit, the employer usually pays the premium on behalf of the employees.
The insurance coverage is membership-based and usually ceases when the member exits the group unless it is agreed in advance that the benefit will continue after the member has left the group, like in the case of an employee post-retirement.
An employer offering a group insurance scheme as a service benefit, who pays the insurance premium in full or part, will be considered the policyholder. The employees will be considered the insured beneficiaries.
In non-employer-employee groups, the group organizer will be the sole policyholder, while individual members will be insured beneficiaries. The group organizer (i.e., the president, secretary, or manager of the group) is required to have due authorization from the majority of the members to arrange insurance for them or to arrange it as part of a necessary activity of the group.
Claims made under a group insurance policy are usually processed/routed through the policyholder, i.e., the employer or the group manager/organizer.
The basic types of group insurance are:
In a group health insurance policy, the members of a group are insured against medical expenses that may arise on account of sickness, treatment, including hospitalization costs, etc. This may even extend to covering the costs of critical and life-threatening illnesses based on the policy terms.
In a group life insurance policy, a single policy covers all the members of the group against death. If any member meets an untimely demise, the assured sum will be paid to their nominees. However, this will not affect the coverage of the other members. One of the advantages of a group life policy is that this policy covers even those previously unable to obtain an independent policy. Unlike personal term insurance plans, upto a certain Sum Assured no member is required to undergo a medical checkup before signing up for a group insurance plan.
If you are looking for a more comprehensive plan, a Group Insurance Scheme that provides coverage against death, illness, and disablement with options and benefits, such as joint life cover, cancer, critical illness cover, etc., can be chosen.
Gratuity is required to be paid by an employer under the applicable law or the employer service rules if an employee has served the company for at least 5 years. In the case of superannuation, retirement, resignation, death, or disablement, 5 years is not required. This kind of group insurance ensures that the gratuity payments are secured.
This type of insurance helps support an employee post-retirement by providing them with a steady stream of income after retirement.
Group travel insurance insures members against unforeseen medical or non-medical contingencies that may arise in the course of travelling. The coverage lasts until the trip is over and also generally covers financial emergencies that arise during travel due to cancellations, etc.
Group personal accident insurance insures the members of a group against death or disablement caused due to accidents by providing coverage against the exorbitant expenses incurred by a person due to death or partial or full disablement or medical treatment.
Under the Workmen Compensation Act, 1923 and other applicable labour laws, employers that employ “workmen” as defined in the act are legally liable to compensate their workmen under certain unforeseen circumstances, such as death or disablement caused in the course of work. For this purpose, employers avail of workmen compensation insurance to cover the medical expenditure in case of injury, disease, etc., to meet their legal obligations.
Certain tax deductions can be claimed on the contributions made to premiums, subject to the maximum limits and fulfilment of the conditions under the applicable law. For health insurance, a tax deduction is available under Section 80D of the Income Tax Act, 1961 to a person who pays the premium for themselves, spouses, or dependents. A person paying the premium for a life insurance policy may also claim a deduction under Section 80C subject to maximum limit of Rs. 150,000/- a year. The sum assured when paid on maturity, surrender, or in the case of death is exempt from tax for the receiver under Section 10 (10D) of the Income Tax Act, 1961. Subject to fulfilling conditions as specified therein.
Group insurance allows the members of a group to enjoy standardized benefits under a single policy no matter their status. Tata AIA Life Insurance offers a comprehensive insurance scheme (for both employee-employer groups and non-employee-employer groups) with coverage against untimely death, illness, or disability, which can also be extended to critical and life-threatening illnesses.
The scheme also offers options and benefits such as joint life cover, differential premium rates for women policyholders, and tax benefits under the prevailing law.
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What is a group insurance plan?
What are the types of group insurance?
How does group insurance work?
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This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.
Every effort is made to ensure that all information contained in this document is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.
Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you