Wed. Mar 22nd, 2023

An employer has several responsibilities towards the employees of their organisation. These days, employers fulfil those responsibilities by providing a slew of benefits to the members of the organisation. One of these includes offering a group life insurance policy to all employees of the company. Such policies aim to provide life coverage to a large group of people under a single plan. One of the best parts about a group life insurance policy is that you do not have to undergo a medical check-up or anything of the sort. Once you become a part of the organisation, you start receiving the coverage of the plan.

Due to its large-scale nature, there are various ways of providing coverage under a group life plan. We take a detailed look at these ways and methods in this article.

What is life insurance?

To better know what group life insurance is, one must first understand regular life insurance.

A life insurance policy is a form of financial assurance for the policyholder’s family’s future. When you sign a life insurance policy and pay regular premiums for the same, the insurer is liable to provide your family with the sum assured amount if an untimely event leads to you passing away. This amount helps your family deal with the financial consequences of such an unfortunate event in a dignified manner. A life insurance policy is of the utmost importance if you are the primary earning member of your family. That is why an employer must select the right kind of coverage for their employees.

Ways to decide on group life insurance coverage 

  • Coverage as per salary

In this method, the employer chooses the coverage for the employee based on their salary and position within the company. This is an effective method because the premium for group life insurance is also deducted from the salary. Ensuring that the coverage is determined by and limited as per the salary is a good way of securing that only a small portion of the salary is deducted. The employers determine the coverage and premium by taking into a certain percentage of the employee’s salary.

Thus, the coverage of an employee in an executive position would be higher, but so would be the premium.

  • Flat coverage 

Under this type of method, the same coverage is provided to all members of the organisation regardless of their salary or position within the company. The master policyholder clubs all the employees of the organisation under one class and then proceeds to provide them with the same coverage. So, whether someone is an entry-level employee or an executive, the life insurance coverage remains flat across the entire organisation.

  • Coverage as per the employee’s working years 

This is also called the ‘length of service schedule’, and it implies that an employee gets coverage as per the number of years they have devoted to the company. The longer they have been at the company, the more will be the coverage they receive under the group life insurance plan. Though this is not a very common option, it is an effective way of determining the benefits one wishes to provide for their employees. This is also a good way to retain employees for the long term.

  • A combination of flat coverage + salary-based coverage 

In this type of method, the employer determines the coverage of one class of employees on the basis of their salaries/positions. On the other hand, another class of employees receives flat coverage regardless of their earnings or positions. This option is usually chosen by companies that handle office operations as well as the functioning of factories, warehouses, etc.

These were some methods of determining how to provide life insurance coverage to many people. Besides these, an employer should also keep in mind some points to ensure the maximum benefit for employees.

What to keep in mind when finalising group life insurance coverage 

  • Opt for comprehensive coverage that includes financial protection from multiple types of death and diseases
  • Buy group insurance from an insurer that has a large list of network hospitals. An employee should be able to access cashless treatment anywhere across the country.
  • Provide an option for employees to avail additional coverage with their group plan if they want to.

Employees should also know what their group life insurance policy is like and be well-aware of the policy wordings. This allows one to act efficiently when difficult times arise.