Life insurance for a group works like a collective cover for a group of individuals rather than individual cover for life. The group can be of any number and must share some commonality—employees of a company, members of an association, payers of a club or a group of depositors in a bank. Usually the cost of insuring a group is lower than what it would cost to insure the members individually. Hence group life insurance schemes are popular with companies as an incentive for their employees because the later can then feel secure. Almost all life insurers in India offer group life insurance schemes (GLIS).
Employee Provident Fund Organization (EPFO) in India has made it mandatory for the employers to provide insurance cover for their employees under the Miscellaneous Provision Act 1952 and Employee's Provident Fund. Private companies also try to provide this cover which is affordable to work as an incentive for their employees and club it in the latter’s annual compensation package. Subscription to the Group Life Insurance Scheme may be of the following types:Contributory
A contributory group life insurance schemes (GLIS) is one which members contribute partly or fully towards paying premium for the group insurance cover. For example, the employer may cut a part of the salary of the employees to include them in the group life insurance schemes (GLIS).Non-contributory
A non-contributory group life insurance schemes (GLIS) is one in which the covered members do not pay anything to get benefits of insurance cover. For example, the employer footing the entire cost of premium for all its employees.
Features of Group Life Insurance Schemes
Master certificate/member certificate - Usually the employer is the buyer of the group policy cover and hence retains the master copy of the policy. Members of the group are provided with a certificate of insurance. Like individual policies, the members can designate a nominee who will be the beneficiary to receive benefits in case premature death happens.
Affordability-The group life insurance covers are less costly than individual life insurance covers and hence are popular among employers to offer a security umbrella to their employees. Even those who cannot afford insurance can be insured for a nominal sum under GLIS if they become members of a group that provides insurance cover.
Acts as an incentive-While the employer, by providing the group life insurance cover makes it attractive for the employee to work under him, sometimes the GLIS acts as an incentives for people to subscribe to various offers. Banks for example, are known to club group life insurance schemes into their fixed or savings account products to attract depositors.
Security net for all the members-Life insurance can be costly and insurers decide a premium on a case to case basis. Sometimes past medical history and lifestyle of an individual may result in his being denied insurance cover. Group life insurance scheme, on the other hand provides for all group members just by their group membership.
Convertibility-Though group life insurance cover ceases to operate with termination of employment, it can be converted into an individual life insurance cover, albeit at a higher cost if the insurer so wishes. But the discounted rate at which the group life insurance plan was available will not apply once he/she ceases to be member of the group.
Aam Aadmi Bima Yojana (AABY) —Social Security For The Poor
The Central Government in association with public sector insurer Life Insurance Corporation of India from January 2013 has introduced a scheme called Aam Aadmi Bima Yojana (AABY). AABY is a form of social security net by extending life insurance to even the below-poverty line (BPL) people. Under the AABY, the group member is usually one earning member or the chief family member of families below poverty line or marginally above the poverty line.
For a sum assured of Rs. 30,000, the members have to pay a nominal premium of Rs.200/- per annum. Of this, half will come from the Social Security Fund set up by the Government of India. The State Government/ Union Territory will bear the remaining 50 % premium in case of rural landless households. The State Government/ Union Territory and/or the nodal agency and/or member will bear remaining 50 % in case of other occupational groups.
Even the list of documents accepted as age proof has been expanded so as to include ration card, extracts from birth register/voter’s list/ school certificate or Aadhar card. Since the BPL category is too poor to afford life insurance, this is a non-contributory scheme with the premium directly paid from subsidies.
The basic idea is to provide some social security cover to poor citizens and extend life insurance benefits to their families.
Various Group Life Insurance Products
Here are some popular group life insurance schemes from leading insurers in India
Bajaj Allianz -The group life insurance policy from Bajaj Allianz provides two options to its members to receive the death benefit. The option can be exercised at any membership anniversary or at inception. While the default option will be Option I, under Option II a part of sum assured is payable at death and the rest as deferred payment over the next decade.
SBI Life -SBI Life provides two types of group life insurance schemes—Sampoorn Suraksha and Suraksha Plus which offer affordable insurance to members of a group.
LIC -Public sector insurer Life Insurance Corporation of India has two plans for group life insurance which are renewable and of one-year duration.
ICICI Prudential Life Insurance-ICICI Prudential Group Term Life plan is available to both non-employer - employee groups and Employer-Employee groups which include microfinance institutions, non-banking financial institutions, banks and other professional groups. These are one-year renewable plans that provide a lumpsum sum assured to members of a group in case of their premature death.
Comparing Group Insurance Plans
A number of insurers, both public and private sector in India, offer group life insurance schemes. In order to zero in on the best and most affordable group life insurance plan from several insurers, you may choose a third party website such as BankBazaar.com, compare and choose the best group life insurance plan for you.
Group life insurance scheme is a low-cost life insurance solution for groups that extends the benefits of insurance to all members. Though popular among employers, these could also work as a social security net for extremely economically deprived populations and extend life insurance benefits to them.
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