In this day and age, the workforce has a life of its own. Each employee’s contribution provides life to the business plans and thus the company meets its goals. Therefore, it is of utmost importance to take care of the primordial needs of the employees and boost morale.
One such ingenious solution to keep up the morale of employees is by providing life insurance plans to provide for their loved ones in case the unthinkable happens to them. It helps build trust in the mind of the employee and garner loyalty, knowing that their employer will ensure that the people they leave behind are well taken care of. Such a system is highly effective and possible through group insurance plans.
What is group term life insurance plans?
A term life insurance is a financial instrument designed to provide financial protection for an individual’s beneficiaries in the event of their death. What is group term life insurance plans is easy to understand by replacing the individual with a group that can be clubbed under a single category.
Let’s simply what is group term life insurance plans.
It is a life insurance plan that covers a group of people with a similar agenda, such as an employer and their employees. Group insurance plans provide coverage for the employees of an organisation wherein each individual covered in the policy must be registered for it. The employer is responsible for updating the insurance provider about additions and removal of people from the group insurance plans.
Understanding group insurance plans
Let us assume an example to further simplify what is group term life insurance plans.
Suppose an employer purchases group insurance plans to motivate their employees. They will have the following features to consider:
- Unlike individual term plans, group insurance plans are usually only available for a year. The employer will need to renew the policy every year to cover the lives of their employees who are still part of the organization and part of the policy.
- Group insurance plans have defined premium payments too. However, the employer will need to notify the insurance provider about additions and removal of individuals from the scheme.
- The rate of premium is calculated based on the number of individuals covered under the group insurance plans. The more the people covered, the higher will be the premium.
- Unlike individual life insurance policies, group insurance plans do not offer maturity benefits. Therefore, the premiums paid by the employer and the employees towards the group plans are not refunded by the insurance provider.
- In the event of the death of an employee during the renewed policy year, the beneficiaries must inform the employer, who will in turn notify the insurance provider of the policyholder’s demise. The insurance provider will subsequently pay the sum assured for the employee to their beneficiaries.
Types of Group Insurance plans
Based on the employer’s motivation to build loyalty and trust among employees, they can choose from the following group insurance plans:
- Group secure return –
This plan helps employers cover the necessities of their employees such as medical benefits during the post-retirement phase, employee welfare funds, and group encashment schemes. It is a non-participating and non-linked plan to navigate the basic necessities of their employees.
- Pradhan Mantri Jeevan Jyoti Bima Yojana –
These are group insurance plans provided by the Government of India to help employers nurture their employees with basic life insurance coverage. It is also a non-linked and non-participating plan that employers need to renew every year for continued coverage. They also need to update the number of employees covered by the plan for an accurate estimation of the premium to be paid.
- Group Superannuation Secure –
Another incredibly beneficial non-linked and non-participating policy is the Group Superannuation Secure. The employer needs to purchase these group insurance plans if they want to cover the basic post-retirement pension schemes for their employees. This particular policy provides guaranteed assurance to employees that their golden years will not be one of struggle. Therefore, as an employer, you could use this plan to put their minds at ease and boost their sense of loyalty and belonging to the company. Many large organisations use these group insurance plans to provide retirement funds for their employees.
While basic group insurance policies help employees with peace of mind that their families will be financially secure in the event of their death, pension plans provide higher benefits. Not only will the employee’s family members benefit from a periodic pension to take care of their basic needs, but the employee themselves will be financially secure in their golden years.
Conclusion
Group insurance plans are excellent motivators that help align an employee’s loyalties with the company. It works on the simple psychological principle that when the employer cares for their well-being and that of their loved ones, the employee is motivated to continue performing at optimum levels to ensure that they partake in the benefits. Thus, group insurance plans help garner loyalty, improve performance, and promote employee retention.
