Answers to All Group Life Insurance FAQs

An organisation is as good as its human resources. And thus, as employers, it becomes necessary for us to take care of our employees so that they take good care of our customers and, ultimately, the business. One of the most effective tools used for employee welfare is a Group Life Insurance policy.

A group term plan is insurance coverage that provides financial aid to our employees’ families in case of their death in an unfortunate incident. Today, it has become one of the most basic fringe benefits offered by employers worldwide. Thus, as employee-centric employers, we must offer the same to meet their standard fringe benefit expectations.

Now, as an employer, it becomes highly important for us to know all details about these group plans so that we can make an informed decision for the welfare of our employees and our business. So, in this article, we bring to you answers to all the frequently asked questions about a group term life insurance plan.

Answers to All Group Term Life Insurance FAQs

Below, we have listed the questions which are frequently asked by employers about group life plans, along with their answers –

Q1. Do employers need to pay the entire premium for a group life insurance plan?

As an employer, we can choose to provide either a contributory group term plan or a non-contributory group term plan. If we choose the first type of plan, then the employees need to pay a part of the premium to avail the life insurance benefits.

However, suppose we choose to go with the non-contributory group plans. In that case, our employees need not contribute anything towards the premium, and we must pay the entire premium on their behalf.

Q2. What are the benefits of providing a group term plan to the employees?

There are various benefits of providing a group term plan to the employees. Firstly, it helps us meet their basic fringe requirements. Secondly, it helps us convey to them that we care for them. This helps boost the employees’ morale, which in turn increases their productivity and the company’s profit margins.

Group term plans also help us keep the attrition rates low when employees feel valued and cared for. They do not look for other job opportunities. This helps us retain good talent and keep our recruitment costs low. Moreover, happy employees spread the good word about the company, which again helps us attract good talent to the organisation.

Q3. Are there any tax benefits available for offering group life insurance to employees?

The amount that we pay as the premium towards a group term insurance plan is counted as a business expense under Section 37 of the Income Tax Act and thus can be claimed as a tax exemption. So, we need not pay any tax on the premium amount paid under a group term life insurance policy.

Q4. Who all are eligible for providing group term plans?

The following are eligible for providing group term plans –

  • Formal Employer-Employee Groups
  • Informal Non-Employer-Employee Groups
  • Academic Institutions like schools and colleges
  • Banks
  • Non-Banking Financial Corporations (NBFCs)
  • Professional associations such as those of chartered accountants, doctors, lawyers, etc.

Q5. Is it mandatory to provide group term insurance to employees?

It is not mandatory for us as employers to provide group term plans to our employees. However, considering the benefits offered by group term insurance, we should provide this coverage to our workforce.

Q6. What is covered under a group term plan?

A group term plan is a pure protection policy that provides coverage in case of an untimely death of an employee. As employers, we can also choose to enhance the coverage of the group term plans to provide financial assistance in unfortunate events in which the employees have got a disability or a critical illness. We can also opt for rider options like child education coverage or weekly compensation benefit to provide comprehensive life insurance coverage to our employees.

Q7. Are there any exclusions under a group term policy?

There exists an exclusion under group term plans if the same has been offered for an employer to their employees under a formal setup and if it compulsorily provides coverage to all employees. This exclusion is in regards to suicide by an employee within 12 months from the start of coverage. In such a case, only 80% of the death proceeds are payable by the insurance company to the deceased employee’s family.

Conclusion

Although not mandatory as per law, group term plans have become a necessary fringe benefit that we as employers must provide to our employees. Whether we are running a startup, MSME, or a well-established multinational company, group life insurance offers the same array of benefits to all employers. It helps us keep our employees’ morale high which ultimately works in favour of the business in terms of a cordial work environment, high productivity, a feeling of belongingness among employees, and tax exemption benefits. Thus, as employers, we must know all key details about these group plans so that we can make an informed decision for our employees and our business.

Leave a Reply

Your email address will not be published.