Some employers offer group life insurance plans as part of the compensation package to their employees. Employers also use group life insurance plans to attract the best employees. Group life insurance plans have their advantages and disadvantages.
Group life insurance provides coverage at a nominal investment. Generally, the employer deducts a fixed amount from the employee’s salary and pays it to the insurance company. Alternatively the employer can directly pay the premium as a welfare measure. In most cases if the employer directly pays the premium, the policy amount that is paid after maturity will be equivalent to one year’s salary. This might vary as per the terms and conditions of different policies. The amount of premium and coverage will depend on the employee position and years of service. There is no upper limit on the premiums except for some restrictions in law and employer’s policies. The premiums are generally very nominal. This is because the number of policy holders is very huge in a group insurance policy. Large number of policy holders mean large amount of funds invested. Insurance companies find group life insurance profitable because the numbers of persons insured are large but the risks are small. All the persons taking the group insurance are unlikely to die at the same moment. Since the premium will be paid either directly by the employer or be deducted from the employee’s salary, the company can be assured of prompt payment of insurance premiums. Generally, employees do not have to undergo a medical examination. Employees will be required to undergo a medical examination only if the insurance company is not satisfied about your heath. Group life insurance rates are based on a number of factors, including:
• Size of the group;
• Company claims history;
• Type of occupations associated with the group;
• Gender and average age of the employees;
• Employee salaries (if a salary-based plan is purchased).
An employee must not depend on the group life insurance plan offered by the employer as only life insurance policy as it might not provide adequate coverage. The benefits are generally not sufficient enough to the contingencies. The coverage generally ceases when the employee leaves the employment or retires from the job. There are certain restrictions as far a group insurance policy is concerned. Many policies have a minimum number and if they are not met the insurer is unlikely to consider your company for an insurance policy. Most insurers won’t provide coverage for groups of fewer than 10 members. The average policy costs about 5 cents for every $1,000 worth of coverage. Some policies require at least 1000 members to apply for one group insurance policy. A company’s life insurance rates are re-evaluated every five years or so to account for changes in the company’s demographics. If the average age of employees goes up, or a company’s claim rate increases, insurance premiums may go up as well.
