How Group Life Insurance Benefits Both Employers and Employees?

bySurobhi BoseLast Updated: August 19, 2022
Benefits of Group Life Insurance

Nowadays, a large number of organizations face a common problem of employee attrition. However, providing a group insurance plan to the employees is the best way to deal with this type of issue. In this day and age, a group insurance plan has become an important part of the employees’ benefits package. But before we start with our discussion on how group insurance benefits both employers and employees, let’s talk a little about what group life insurance policy is.

What is a Group Life Insurance Policy?

A group insurance policy is a specified life insurance product that is specially designed to provide coverage to a large group of people under a single policy. In a group insurance policy, the owner of the policy is the organization or the employer and the policy provides coverage to the members of a particular organization or employers. Due to comprehensive coverage at an affordable premium rate, the popularity of group insurance policies is burgeoning rapidly these days. Moreover, there are several other benefits offered by group insurance plans.

Benefits of Group Insurance for Employees

The following are some of the benefits offered by group life insurance for employees:

Provides a Comprehensive Insurance Coverage

Maximum group insurance plans available in the country inevitably provide insurance coverage to the members of the group as long as they continue to be a part of it. A group insurance plan is beneficial for those who can’t afford to purchase a standalone life insurance policy. However, it is important to keep in mind that a group insurance policy terminates once the employee leaves the group.

Affordable Premium Rates

The premium rates of a group insurance plan are more affordable as compared to the normal life insurance plan because the risk percentage is equally distributed over the entire group. The premium amount is generally split between the employees and the employers and is 30-35% more economical than an individual life insurance plan. Apart from this, various other factors determine the premium rate of the policy like professional risk, average age group, etc.

Provides Coverage to the Employees’ Families

A group insurance plan also provides coverage to the family of the insured. So, if a person owns a group insurance plan, he/she doesn’t need to lighten his/her pocket by purchasing a separate life insurance policy for the family member. Most of the group insurance plans provide sufficient coverage to the family of the insured i.e. the spouse and the children.

Effortless Payment Option

The premium of the group insurance plan is directly deducted from the bank account or the salary of the employee. Thus, the process of premium payment is simple and hassle-free. Moreover, it automatically reduces the risk of missing the due date of the premium payment.

Rider Option

The group insurance plan also provides an option to expand the coverage of the policy by adding rider benefit at a minimum premium amount. As per the suitability, the policyholder can purchase add-on rider benefits like a personal accidental benefit, critical illness benefit, etc. Now that we have seen the benefits of group insurance for employees, let’s take a look at the benefits of the group insurance plan for the employers.

Benefits of Group Insurance for Employers

The following are the benefits of group life insurance for employers:

Helps to Deal With Employees Attrition

According to the experts, buying a group insurance plan for the employees is beneficial as it shows the employer’s concern for the employees. It makes them feel valued as their health concerns are being taken care of. Moreover, it also helps an organization attract more talented employees.

Asset Management and Professional Expertise

The group insurance policy that incorporates the features of annuity and gratuity are managed by professionally experienced insurance experts. Thus, the return on investment is greater for the members who are covered under the group insurance plan.

Increased Productivity

It helps to create a stress-free environment for the employees and helps them to nurture productivity which in turn benefits the employers by meeting their short and long-term business objectives.

Offers Enormous Savings to the Employers

The group life insurance provides coverage at a subsidized rate. Thus, this plan benefits the group of individuals who can’t afford to have a standalone life insurance policy. According to the risk factor of the entire group, the premium amount is calculated by the insurance companies. The premium payment can be contributed in any one of the following two ways-

  • The entire premium amount is paid by the organization or the group owner who owns the policy for their employees
  • A part of the premium amount is paid by the insurer i.e. the organization or the employers, whereas the rest of the premium amount is paid by the employees or members of the group insurance plan. Thus, as the best of both worlds, the group insurance plan not only benefits the employees but also saves the out-of-pocket cost of the employers

Tax Benefit

The amount contributed by the employers towards the group life insurance plan is eligible for tax deduction under the Income Tax Act. Moreover, the employees who are members of the policy can also avail the tax benefit.

Wrapping it up!

The success of an organization majorly depends upon the productivity of the employees. If an organization has a team of motivated and productive employees, then it can benefit the business enormously. By offering a group life insurance plan as a part of an employee benefits package, the company can create a secure environment for their employees and can lift the overall productivity. Moreover, as a crucial part of the employee benefits package, a group insurance plan safeguards the finances of the employees as well as the employers at the most affordable rates.

How does group life insurance pays out?
Similar to other life insurance policies, group life insurance pays out a death benefit to the designated nominee of the policy in the event of policyholder demise during the policy tenure.
What are the tax benefits offered under the policy?
The employer and the employee can avail the tax benefit as per the prevailing tax law.

You May Also Like