Be it a multinational company or a startup, all organizations need employees who are not only efficient but can also help the organization build a good value in the market for its work culture. A group life insurance plan is one of the most affordable ways in which organizations can attract and retain such employees. There are a variety of benefits offered by these group plans for both the employees and employers, making them a win-win tool for both sides.
What is Group Life Insurance?
A group life policy is a type of life insurance plan that provides the benefits of insurance coverage to an entire group under a single plan. It helps organizations, especially corporates, meet their employees’ fringe benefit expectations. These plans ensure the financial stability of the employees of an organization in events such as sudden death, partial/total disability, permanent/temporary disability, and terminal illness.
There are two types of group life plans available in the market: contributory and non-contributory plans. Under the contributory group life policy, the premium payment will be shared between the employee and employer. Whereas, under non-contributory group life policies, the employer pays the entire premium and, thus, no premium payment responsibility lies with the employee. Even under the contributory plans, the employee share is very affordable and does not make a huge impact on their pocket.
Eligibility Criteria for Purchasing Group Life Policies
The following entities are eligible for purchasing a group life plan:
- Financial institutions (Non-banking)
- Professional groups
- Employee–employer groups
- Non-employee–employer groups
- Microfinance institutions
How Does a Group Life Policy Work for Corporations?
A group life policy is purchased by corporations for their employees. Since they are purchased for an entire group, the plan is available at affordable prices.
Employees who receive group life cover from their employer may not have to pay the premium in case the employer has provided a non-contributory group life policy. Employees who choose to opt for enhanced coverage along with the base cover will have to pay the premium for the coverage that shall be deducted from their salary. Group life policies usually have a tenure of one year, which can be renewed annually.
When the employer purchases a group life policy for their employees, the employer becomes the master of the contract who decides all its terms and conditions.
Benefits of a Group Life Insurance Policy for Corporates
Many employers provide group insurance policies to their employees as well as the flexibility to customize and enhance the coverage by adding riders to their group policy at reasonable prices. Here are some benefits of group life covers for corporates:
- Affordable Life Insurance Cover: Employers tend to purchase group life policies in bulk for their employees, which results in significantly lower premium rates. This allows the organization to provide life insurance coverage benefits to its members at economical costs.
- Reduced Employee Attrition: Life insurance is a major employee benefit that many employees do not overlook. In fact, according to some surveys, employees like to stick with an employer who provides insurance benefits. Providing group life cover to employees will help an employer ensure that they keep their loyalty to the organization while increasing employee morale.
- Tax Benefits: A significant advantage of group life cover for corporates is that the employer can avail the advantage of tax exemptions for the premiums paid toward a group life policy as per Section 37(1) of the Income Tax Act, 1961.
- Increases Employees’ Performance: A group life plan provides a sense of security, and the members of the organization will not have to worry about the financial security of their loved ones in case of their unexpected demise. This way, the employees will be able to work without any financial stress, thereby increasing productivity and enhancing performance.
- Helps Build Employee-Centric Brand Name: When you take care of your employees by attending to even their life insurance requirements, it makes them feel valued. This is channeled to other potential candidates for the company in the job market, helping the employer build an employee-centric brand name.
A group life policy provides easy and affordable access to life insurance covers for a company’s employer and employees. As it is purchased in bulk, it is inexpensive compared to a retail individual life insurance policy. This group policy provides coverage against life’s uncertainties, such as an unforeseen demise. As a result, many employers have realized the importance of group life plans to ensure continuous development in the organization in terms of performance and ensuring employee well-being.
Irrespective of the organization’s size, it is the responsibility of the employer to ensure the well-being of the employees. Providing group life insurance coverage for the members of an organization can help maintain a better working culture, where the employees feel that they are cared for.