Group Insurance Policy

How Does a Group Insurance Policy Work and Why Do You Need It?

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As the name suggests, group insurance covers a group of people under a single policy. As per IRDA, a group assembles people sharing a common purpose or engaged in a common economic activity. Thus, a group insurance policy can be purchased by an employer for the employees or the administrator of a society or an association.

A group cannot be formed to purchase group insurance. The group members must have a clear relationship with the leader of the group purchasing the policy with regards to services other than insurance. 

How does a group insurance policy work?

A group insurance policy in India provides equal coverage to all the group members. The policy statement specifies the coverage benefits. A master policy containing the details of all the beneficiaries covered under the policy is issued to the group’s employer or an administrator. Beneficiaries can be added or deleted from the policy document as and when required. 

Group Insurance - Group Insurance Policy

Companies and business enterprises usually take group insurance for their employees as a part of employee benefits. The claim raised by an insured employee is processed through the employer.

What are the features of group insurance?

Group insurance policy features depend upon the type of group insurance. However, some common features have been mentioned here.

The premium of a group insurance policy is lesser than an individual insurance policy. This is because the risk to the insurance company is divided among a large number of people. 

A group insurance policy in India can be contributory or non-contributory. In the case of a contributory group insurance policy, the employees pay a part of the premium amount to avail of the cover. Typically, the employer deducts the contribution from the employee’s salary. In the case of a non-contributory group insurance policy, the employees are not required to pay anything for the coverage because the employer bears the premium.

Group insurance policy can be issued to a formal or informal group. Formal groups are companies or organizations where the employers purchase group insurance for the employees. On the other hand, informal groups are cultural or social associations or societies where the head or administrator of the association/society purchases the group insurance policy.

What are the types of group insurance?

There are many types of group insurance policies in India. Some of the major types have been discussed here.

Group Health Insurance

Group Health Insurance is a common group insurance policy for employees. Group health insurance provides coverage for the medical expenses of the employees of a company. The group health insurance plan can also cover the family members and dependents of the employees under the same policy. 

Health Insurance - Group Insurance Policy

The sum insured depends upon the plan purchased by the employer. It is usually between Rs. 2 lakhs and Rs. 5 lakhs. The employer pays the full premium, or a part is paid to the employees. Employees are free to opt for add-on benefits by paying an extra premium. 

Some of the major benefits of group health insurance are as follows.

  • Provides health insurance coverage to employees who may not be able to pay premiums of individual health insurance plans.
  • Family members and dependents can also be covered. 
  • No waiting period regardless of the severity of the disease 
  • The insurers seek no medical screening. 
  • It covers critical illnesses such as heart disease, diabetes, stroke and more. 
  • Maternity cover, including newborn baby cover, is provided at no extra cost. 
  • Coverage for pre and post-hospitalisation expenses 
  • Can offer coverage for OPD and daycare expenses 

Group Life Insurance

Life insurance is another kind of group insurance policy. A master contract covers all the employees of the company. The employer is the buyer of the policy and possesses the master contract. The premium payment arrangement can be contributory or non-contributory in nature.

Life Insurance - Group Insurance Policy

The group life insurance plan can either be term life coverage or permanent coverage. Term life coverage policy needs to be renewed on an annual basis. On the other hand, permanent coverage provides coverage for the entire lifespans of the members. 

Some of the important benefits of group life insurance policies are as follows.

  • The employer can use the group life insurance policy to build a fund over the years. The employer uses this fund to give gratuity benefits to the employees after a certain number of years in service. 
  • The employer can use the group superannuation method to give retirement benefits to the employees. By this method, the funds built up using the group life insurance policy provides a steady income to the employees after retirement. 
  • In case a member of the group life insurance policy dies, the sum assured is paid to the member’s nominee.

Group Personal Accident Insurance

Personal accident insurance can also be provided by employers to their employees by way of a group insurance policy for employees. Group personal accident insurance provides financial coverage to the members if an accident leads to hospitalization, temporary or permanent disability, or even death. Group personal accident insurance is an important employee benefit that the employer can offer the employees. 

Accident Insurance - Group Insurance Policy

Some of the benefits of group personal accident insurance are as follows.

  • Comprehensive coverage of hospitalisation expenses and expenses incurred on treatment of injuries caused by an accident 
  • Coverage is offered for bone fracture caused by an accident 
  • A certain percentage of the sum insured is paid in case of temporary complete disability caused by an accident 
  • 50% of the sum insured is paid in case of partial disability caused by an accident 
  • 100% sum insured is paid if there is permanent loss of vital limbs due to an accident 
  • In case of death of the insured employee due to an accident, 100% of sum insured is paid to the nominee

Conclusion

If a company or an organization offers any group insurance, all its full-time employees are eligible. The base sum insured is not in the control of the employees, although the employees are at freedom to increase the sum insured by paying more premium.

Irrespective of the amount of premium being paid, it should be a must for every employee to opt for a health cover.

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