Understanding Group Insurance: How It Works and Why It Matters

Insurance is a necessity given the unpredictability of life and health. Insurance protects the insured policyholders against any financial loss caused by ill health. Organizations purchase group insurance to protect medical coverage for their employees effective throughout their tenure. Group insurance covers life, health, and other types of personal insurance. The organization pays the premium without any deduction from the employee’s salary. Employees of all ages, financial backgrounds, gender or profession, can be covered under group insurance.  

This insurance provides dual benefits to both employers and employees. We have listed below the benefits for both:

1. Benefits towards employers

The group insurance policy offers the following benefits to employers:

Cost-effective: Employers can purchase this insurance for a large number of employees at a lucrative and cost-effective price.
If the sum assured under the group insurance gets exhausted, the employer can opt for the corporate buffer for employees suffering from life-threatening or critical illnesses.
Employee satisfaction: Offering medical insurance to employees is beneficial in retaining old employees and attracting recruits while generating goodwill among the employees.
Tax saving advantages: The company can claim a deduction of the premium paid for the group insurance policy under section 37 of the Income tax act.
Streamlined process: All employees’ insurance is consolidated under one insurance policy, making it easier to manage all the policies.
2. Benefits towards employees

The group insurance policy offers the following benefits to the employees:

No medical screening requirement: The employee is not required to undergo any medical screening before being included under the benefits of this policy.
Cashless claims: Group insurances have a tie-up with several hospitals known as network hospitals for quick and hassle-free cashless claims. Under this, the employee need not pay anything from his pocket.
Reimbursement claim: This insurance scheme offers quick reimbursement if the employee visits any non-network hospital and pays for treatment. The insurance also provides pre and post-hospitalization expense reimbursement to the employees.
Room rent coverage: Group insurance provides room rent for standard hospital rooms. It is standardized at 1% of the sum assured for the room rent and 2% of the sum assured for a stay in ICUs.
Low premium: Group insurance plans offer lower premiums tailored to employees’ needs and want

Functions of a Group Insurance Policy

This insurance policy offers multiple coverage options but focuses on including the following options:

Term life insurance offers a sum assured in the event of the untimely death of the employee within the tenure of the organization. The payout may be as lumpsum or in instalments.
Gratuity applies to employees completing five years of continuous service with the organization. This insurance policy offers investment options to create a gratuity corpus.
Term life insurance covers the outstanding dues or loans in the event of the employee’s untimely death within the organisation’s tenure.

Key things to note before buying a whole life insurance

Group insurance is beneficial for the employees as it offers hassle-free access to a health insurance policy and for the employer for ease of managing the vast number of policies for all the employees.

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