Group insurance is an insurance plan covering multiple people within the same contract. For example, employers and employees, professional associations, cooperative societies, and other organizations. Most insurance companies offer group insurance plans to meet the insurance-based requirements of these groups. These could be group-term life insurance plans, health insurance, and other types of personal insurance.
A group insurance policy has multiple advantages, including insurance coverage for all its members, irrespective of gender, age, profession, and socioeconomic background. Several types of groups may opt for insurance plans for their members. These include the following:
- Formal Groups- These are employer and employee groups, with all members employed at the same company or organization. Professional organizations, business entities, and companies are instances of formal groups where the employer purchases the insurance plan.
- Informal Groups- These members may belong to any cultural, social, or welfare association or society or may have the same account. In this case, the administrator or owner will buy the insurance policy on behalf of all the members.
Functions of Group Insurance
There are several functions covered under group insurance plans, including the following:
- Term Insurance- Group term insurance secures everyone in the group, with the sum assured paid to the family members/nominees of the deceased individual within the employment tenure with the company.
- Annuity- Superannuation schemes may also be available under group insurance policies, enabling better retirement planning for employees of a particular organization at the existing/current NAV (net asset value) through a pension.
- Gratuity- Upon completing five years of service, an employee will be eligible for gratuity, subject to the guidelines governing the same. Group insurance may sometimes offer investment choices for organizations with regard to building a gratuity corpus.
- Health Coverage- Some group insurance plans come with multiple types of health insurance plans that ensure coverage for sudden hospitalization, treatment, and other associated health-related expenditure of group members.
- Savings Plans- Many plans also promote long-term savings and investments for meeting future goals like weddings or children's higher education.
- Coverage for Liabilities- Group insurance plans may also help provide coverage for members' financial liabilities, including the repayment of loans and debts or taking care of family members upon death or disability.
Key Features and Benefits of Group Insurance
Here are some of the main features and benefits offered by group insurance:
- With risks being spread across a bigger number of members, these plans ensure more standardized coverage solutions at relatively competitive premiums. The coverage stays the same for all group members.
- Group insurance offers coverage for all members, irrespective of the group size. The plan could cover life, health, travel, and personal accident insurance, among other types.
- A group may include employees and employers, non-employers and employees like credit card holders, or members of any association or organization.
- The group manager will get a master policy in the name of the group. Premiums are individually charged to all the members or may be paid by the group from its own funds.
- Members only have coverage till they are part of the group. Coverage will cease to exist in case any member leaves the group.
- Group insurance often offers coverage to spouses, children, and other dependents of members.
- Members of the group do not have to fulfill any conditions for availing of coverage, unlike many individual insurance plans.
- The minimum number of members may vary, depending on the plan type. Some plans may require at least 10-50 members to be valid.
- The minimum age of entry is usually 18 years, while the maximum age limit is usually 60 years, although it may vary. Some plans may offer entry till 80 years of age.
Eligibility Criteria for Group Insurance Plan
You must meet certain requirements to be eligible for a group insurance plan. These include:
- The minimum number of group members required can vary depending on the type of insurance plan. Some plans may mandate at least 10 members, while others may require 50 members to form a group and be eligible for group insurance.
- You must be at least 18 years old to enroll in the plan.
- The maximum age limit may differ from one plan to another, with some having a cut-off age of 60 years and others allowing entry up to 80 years.
- All members must be active and full-time members of the group to be eligible for the insurance policy.
Group insurance fosters company loyalty and retention while building employee-friendly environments where workers do not have to worry about the basic financial well-being of their families in case of sudden and adverse events. Members of the group can also claim tax deductions on premium payments, if applicable. Employers who pay the premium may also get tax deductions. A few group insurance plans may also be transformed into individual policies upon the exit of any member from the group, subject to the payment of a conversion charge.
Therefore, Group insurance plans are a good benefit for members of a particular group as they help them get decent coverage at lower premiums as compared to individual policies, or at no cost, if the employer is paying the premiums.
Aastha Mestry - Portfolio Manager
An Author and a Full-Time Portfolio Manager, Aastha has 6 years of experience working in the Insurance Industry with businesses globally. With a profound interest in traveling, Aastha also loves to blog in her free time.