A group life insurance covers several individuals of a company, association, or other formally registered bodies.
A single master cover includes all members, and the premium is paid for this cover. Generally, companies and other associations or trusts use this insurance cover to protect their employees. But as we will see, group life insurance must not be treated as the sole life cover you can have, and in some cases, you may also need to opt for additional premiums.
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This article will discuss the benefits and shortcomings of a group insurance policy and what you should keep in mind while factoring it into your overall portfolio of financial products.
The advantage is that such a cover has a lower premium than an individual policy that each employee or member would have to take out otherwise. An extensive group life insurance policy invites lower premiums.
In a company, this policy gives the employees an insurance cover, with the company having to pay a smaller premium per head.
A company offering group life insurance usually takes such a group life insurance cover as a perk for its employees. However, this cover has limited benefits, and the death benefit is generally relatively low. Therefore, an employee covered by a group cover might need to take additional personal life covers to compensate for the shortfall. Since the death of a person can leave his family in severe financial distress, a substantial life cover is essential.
The problem is that generally, the cover seizes to operate when the employee leaves the company. In some cases, the employee can port the policy to convert it into an individual policy, but this might attract a higher premium.
An employee covered under a group policy should, in effect, treat it as a perk and not as a sufficient cover. If there is a chance to opt-out of the cover, then that should be examined. However, an additional life cover may be the answer if the employer is paying the premium. The two insurance policies together might be enough.
However, the employer allows the employee to increase his individual cover by paying the additional premium in some cases. This makes sense because the premium will be lower since the group plan is in operation.
Usually, the insurance cover is a group term life insurance cover, renewable annually. Companies generally take these policies to give their employees a protective life cover during their employment tenure. However, these policies offer limited cover and are usually not sufficient for the people covered. Therefore, treating it as a basic cover is critically important for the employee to get additional life covers.
If the premium or part of the premium is payable by the employee, it would be better to opt out and get an independent cover. While this would mean an additional premium, it would also give better and increased maturity benefits.
There are several advantages of a group cover:
- No medical tests required
- Inexpensive and, in most cases, paid for by the employer
- It may be possible for individuals to add coverage for dependents at personal cost
Therefore it is best to opt for a group plan only if it seems feasible or the company is paying the premium. If the premium is adjusted from the salary, it is necessary to look at the benefits and the cost.
It is perhaps a better idea to see the benefits of a group policy and add additional benefits by paying the extra premium from personal funds. This way, the coverage becomes adequate. In this case, the premium is generally lower than a stand-alone policy.
For an employee to take part in a group life insurance plan, the benefits must be checked, especially if the employee pays the premium. Since group policy benefits are low, the death benefit needs to be checked to see whether it is adequate. If it is not, the employee may opt out of the policy and get an individual policy with better benefits.
However, an employee can use the group policy to get retirement benefits and a gratuity. This means adding these benefits to the policy by paying an additional premium. Whether the policy bought by the employer has these facilities or not needs to be looked into. If the insurance company has such plans, then a group life insurance policy begins to make sense. The benefit is that the premiums for these additional benefits will be lower than for an individual policy for the same amount. Therefore, adding these benefits at a personal cost is a good way of getting excellent benefits by paying a lower premium.
Overall, it is wise to go for a group policy, provided the additional benefits can be included by paying an additional benefit. If, however, the employer offers this at his cost, then it is beneficial to take it. Adding the required clauses, of course, is essential. In the event such clauses cannot be added, it is better to get an individual policy.
The best option is to see what the group life insurance cover offers. Then see if the insurance company is agreeable to additional riders, a retirement plan, or a gratuity plan and what sort of premium is payable should one opt for these.
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