Group Life Insurance: Coverage, Claim & Renewal

Updated: 18-07-2022 10:29:53 AM

A life insurance provides coverage from various risks of life. It financially safeguards the future of your family in case any unforeseen incident happens to you. To help their employees feel safe, many companies offer group life insurance to them. Many people rely on the group life insurance plans because they are cost effective.

What is Group Life Insurance?

A group life insurance is an insurance plan offered by the company or employer to its employees. The insurance offers financial security to the employees and their family members in case of any unfortunate incident. One major advantage of group life insurance is that it usually has lesser coverage cost compared to individual insurance policies, as it is offered in bulk. The insurance policy only covers death and offers no maturity benefit.

Types of Group Life Insurance

According to the Miscellaneous Provision Act, 1952, it is compulsory for employers to provide insurance to their employees through the Employee Provident Fund Organisation. Though group life insurance is for employees, there is a possibility for employers to pay the premium. Group life insurance can be classified into two broad categories – contributory and non-contributory.

• Contributory plans are policies where the premium is paid by both employer and employees covered in the scheme.
• Non-Contributory plans are schemes where the entire premium is paid by the employer. The groups under non-contributory plans are creditor-debtor, professionals, and others.

Further Classification

Group life insurance offered for the groups is divided further into two types – term Insurance and fund management.

1. Term Insurance

• Group Term Life Insurance: The risk coverage can be enjoyed for a specific time period. If a member of the borrower group dies within that period, his/her beneficiary gets the death benefits. The term for these policies is one year which can be renewed annually. The premium paid depends on the experience of the company, employee’s age and number of deaths in companies.

2. Fund Management

• Group Gratuity: This scheme is a little different from others as it is based on fund management. Under this, employees are offered a gratuity as a declared risk cover in case of their retirement, separation or resignation. However, they must have completed at least 5 years of their jobs. The insurance cover for the liability of the employer has to be insured by him.
• Group Leave Encashment: Such a scheme is to fund the leave of an employee. The encashment of the leave is to be paid to the employer.
• Critical Illness Rider: The rider works like an add-on which can be chosen with the preferred insurance plan for the group. Such an add-on provides financial assistance in case the employee suffers from critical illness.
• Group Investment Plan: This is an insurance plan which helps employees get financial protection along with going for investment.

What all Group Life Insurance Covers?

Provides comprehensive and defined coverage to members who represent a particular profession, such as trade, NGOs, organisation. The insurance covers:

• Death
• Terminal illness

How Group Life Insurance Functions?

Let us understand how this insurance works:

• Select the cover and its amount decided by each member of the group
• Employers can choose the coverage amount from different benefit plans
• To commence the policy, premium has to be paid beforehand. The risk coverage is for the duration of one year since it has been started.
• On untimely demise of a member, the next signed beneficiary from his/her family gets the benefits

Eligibility Criteria

Group life insurance policies are offered to the following sections:

• Employer-employee groups
• Banks
• Non-Banking financial institutions
• Micro finance

Documents Required for Claim Process

The organisation needs to be intimated about the death as early as possible. The beneficiary also needs to ensure they submit the required documents for smooth claim settlement:

• Duly filled in claim form
• Certificate insurance
• Hospital certificate
• FIR (In case of accident)
• Death certificate
• Identity, address proof of the nominee of the insured

Group Life Insurance Claim Process

In case of untimely demise of the employee, the nominee or beneficiary can file a claim to get the sum assured through the following steps:

• Inform the insurance company within 24 hours or as early as possible
• Submit the necessary documents like original death certificate, insurance copy, etc. to the insurance company
• Once these documents are submitted, insurance company would assess the details and accordingly settle the claim, if approved

Time Taken to Settle Claims

On receiving the required documents for making claims, the company will connect TPA/insurance company that will appoint surveyor to evaluate the case. Once they are satisfied with the claim, they will transfer the amount to the beneficiary through the organisation within 7-10 days from the date of receipt of the documents.

Exclusions

The group life insurance policy will be excluded if the policyholder dies due to suicide. In this case, the insurance company will only be liable to pay 80% of the single premium paid.

Renewal Process

Group life insurance plans can be renewed after a year of the commencement of the policy. The corporation gets 3 months to revive the policy from the date of first unpaid premium. If the policyholder wants to add or remove any member from the policy, he/she can do it at the time of renewal.

Companies Providing Group Life Insurance In India

Below are the few insurance companies providing group life insurance plans in India:

• LIC
• Canara HSBC Life
• Kotak Life
• ICICI Prudential

Important Aspects

A group life insurance is usually offered by the company to its employees, still one must be aware of certain aspects regarding the policy in order to get the best deal when needed. Some of the points are:

• Group insurance plans offers many benefits such as gratuity, but one should always consider these plans as supplementary and go for individual plans for comprehensive coverage
• Group life insurance cannot be converted to an individual policy as the terms and conditions of the group life insurance is decided by the employer and the insurance company

Advantages of Buying Group Life Insurance Policy

A group life insurance offers coverage to a group of people at the same time. Some of the advantages of purchasing group life insurance policy are:

• The premium paid for such plans are quite nominal, thus, the sum assured offered in case of the sudden demise of the insured are not costly
• Option of choosing riders, such as accident benefit, critical illness, accident and disability, at little extra cost can enhance the coverage offered
• Mode of payment of premium can be chosen by insurers as per their preferences
• The amount of premium paid has tax benefits under Section 37(1) of Income Tax, 1961

 

FAQs

Q1. What is death benefit?

In case of the sudden death of the insured, the insurance company will pay the sum assured to the assigned nominee as death benefit.

Q2. Does one need a pre-acceptance medical check-up for purchasing a group life insurance plan?

One doesn’t necessarily need a medical check-up before buying group life insurance.