In today’s era of a hybrid work model where employees get to work from home and the office, it has become even more competitive than before to hire and retain good talent. As an employer, we need to ensure that our workforce, which is our most valuable asset, is comfortable and encouraged to work with us. For this, we can use various fringe benefits, the most popular being Group Life Insurance.
Today, Group Term Life Insurance has become a default benefit. As an employee, we must provide this to meet the basic fringe benefits requirements of our potential and existing employees. It also helps us convey to our employees that the company cares for them and their loved ones, which helps us boost their motivation and productivity levels.
What is Group Life Insurance?
A group term plan is a type of life insurance policy that provides coverage to a group, generally the employees of a company. These plans provide death benefits to the family of the covered employees in case of their unfortunate demise. Group term plans also provide financial assistance to the employees if they get a permanent/temporary or partial/total disability or suffer from a critical illness.
Group term plans are different from individual term plans because we need to purchase only a single plan for all our employees instead of different individual plans for each employee. This helps us provide life insurance coverage to our employees in a highly affordable manner and reap the various below-mentioned benefits these plans offer.
Types of Group Life Insurance Plans
There are two types of group term life insurance plans based on premium contribution. Let’s read about them in detail below –
- Contributory Group Term Plans
Under these types of plans, the employees need to pay a portion of the premium to avail of the group term plan benefits.
- Noncontributory Group Term Plans
Under Non-Contributory Group Term Plans, we as employers pay the entire premium amount for the plan. And thus, our employees need not contribute anything to availing the group term plan benefits.
Key Feature of Group Term Plans
The following are some of the key features of group-term plans –
- One-Plan Insurance Solution – A group term plan is a single master plan under which we can provide life cover to all our employees.
- Guaranteed Benefits – A guaranteed sum of money is provided as proceeds under group term plans which can help the employee’s family maintain their financial stability in difficult times.
- Customisable Plan – We as employers can customise the group term plan that we select for our employees with the help of available rider options.
Who Is Eligible For Group Term Life Insurance Policies?
The following groups are eligible for getting a group term life insurance policy –
- Employee-employer groups
- Non-employee-employer groups
- Professional Groups
- Non-Banking Financial Corporations (NBFCs)
- Banks
- Microfinance institutions
All individuals who fall in the age bracket of 18-65 years are eligible for becoming a part of group term insurance.
Benefits of Group Term Life Insurance
There are umpteen benefits of group term life insurance, some of which are enlisted below –
- Cost-Effective Fringe Benefit: Group Term Life Insurance is one of the most effective fringe benefits we have as employers. It helps us provide life insurance cover to all of our employees under a single plan, allowing us to do away with the requirement to buy a separate life insurance plan for each employee.
- Reduces Attrition Rates: A group term life insurance can also help reduce attrition rates and retain our human resources. When we offer group term coverage to our employees, we successfully convey that the company cares for them, which helps them feel they belong to the workplace and not look for a job change.
- High Employee Motivation Levels: When our employees feel they belong and are cared for, their motivation level toward the workplace increases. Thus, a group term plan also helps us boost our employees’ morale.
- High Productivity Levels: It is known that motivated employees are more productive. Thus, by helping us boost our employees’ motivation levels, group term plans also help us boost their productivity and the business revenue and profits.
- Brand Value Appreciation: Another benefit offered by group term life insurance plans is that they help us appreciate our brand value. This is because motivated and happy employees make the best ambassadors for any organisation.
- Tax Benefits: As an employer, we can claim a tax exemption for the premium paid towards group term plans under Section 37 (1) of the Income Tax Act.
Conclusion
In a nutshell, Group Life Insurance is a must for all companies, especially those that need to employ a large number of people to carry out their day-to-day operations. Besides helping employers meet your employees’ basic fringe benefits needs, group term life helps keep our business operations running smoothly, without any hiccups due to high employee turnover rates. Another benefit of low attrition is low recruitment costs as we need not hunt and attract new employees.