Tuesday, August 9 , 2022

Conditions For A New Employee To Be Covered Under Employer’s Group Term Life Insurance

Life Insurance

To an employee, there are various benefits that employers offer other than salary compensation. These additional benefits are offered to safeguard the employees’ well-being and health using various investments. One such prerequisite is a group term life insurance cover. This investment is a form of life insurance policy that focuses entirely on the protection of the insured individual using the term insurance cover. However, when an organization purchases one, it is to cover its employees. Hence, it is a term cover bought for a large group of people, i.e., their employees. 

What is a group term life insurance policy and how does it work?

A group term life insurance cover is a term life insurance plan that is provided to a pre-existing group. Such groups can either be formal groups like the employees of an employer or informal groups like holders of a credit card, savings bank account, or more. 

Under a group term life insurance plan, the employers or policy administrators purchase a master policy that specifies the base coverage for all those covered by the group plan. However, it can be enhanced using the optional riders that are available for each member to buy.

A group term life insurance plan provides financial support to dependents of the insured policyholder in the event of an unfortunate demise. Thus, to provide financial support to the financial dependents of the employees, employers offer such a valuable investment as an added prerequisite other than the salary compensation. 

What are the conditions for a new employee to be covered under the Group Term Life Insurance of the employer?

When buying a group term life insurance plan, the employer considers all its current employees and the ones joining in the future. Here are some of the terms for an employee to be considered eligible:

  • Depending on the terms of the employer, all employees that satisfy the eligibility criteria, say, grade, pay scale, designation, and more, will become eligible to be covered under the group term life cover.
  • The group term policy begins from the date of the employment of such new employees subject to fulfillment of eligibility criteria.
  • In the event that new employees join the company between two renewal dates, it is essential for the employer to communicate such new recruitment to the insurance company. 
  • The new employees will be charged proportionate premiums to extend insurance coverage till the next renewal of the master policy. 

Once new employees are covered under the group term life insurance cover, it is the duty of the employer to inform them about the insurance benefits and provide the policy documents. After receiving all details of such new employees, the insurance company will then issue the policy identification card which can be used to avail cashless treatments at a network hospital that are covered within the policy’s scope. 

What are the advantages of a group term life insurance policy for employees?

Group term life insurance plans have the following advantages for the employees:

  • With group term life insurance cover, the employees’ dependents are assured guaranteed financial benefits in the event of an unfortunate demise.
  • The premiums for these plans may be shared by the employers thereby offering substantial life cover for a nominal premium. 
  • There is a formal system of collection of premiums, i.e., deduction from their salary. Thus, the employees need not worry about the hassle of paying the premiums for these plans. 
  • Optional coverage can be purchased, which includes cover for critical illnesses, accident cover, etc. 
  • Affordable premium rates are charged in providing a higher sum assured that otherwise would have to be paid by the individual. This way, either a high sum assured can be purchased or equivalent coverage at a lower cost. 
  • Since the master policy is renewed each year by the employer, the hassles of renewal need not be managed by individual employees. 
  • Further, the premiums for any additional covers purchased by the employees are deducted from the salary in equated installments. 

While the eligibility of group term life insurance plans is based on a variety of factors including the employer’s terms and conditions, it is beneficial to choose a plan that offers broad coverage instead of the standard single cover. Since insurance is a subjective decision, one size does not fit all and hence, it is important to understand what a group term life insurance is and how you can incorporate it into your financial planning. 

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