There are two main types of group life insurance, namely;
- Term group life insurance
- Permanent group life insurance.
Term group life insurance is the most popular type of group life insurance. Term group life insurance is renewable on a yearly basis. Both the employer/organization and the employees/members would benefit from this. While the employees enjoy the coverage this group life insurance offers at minimal or no cost at all, the employers enjoy tax deductions. It is easy to get qualified for, as it does not require any medical exam.
Permanent group life insurance is a type of group life insurance that covers the insured for life. There are three different types of coverage in permanent group life insurance
- Group ordinary plan
- Group paid-up plan
- Group universal life plan
Group ordinary plan: This type of group insurance uses a cash value life insurance plan. The insured members of the group contribute to the plan and are entitled to the cash part of the policy, while the cash value is retained by the organization and used to pay for the policy of the other members.
Group paid-up plan: for a group paid-up plan, two types of insurance plans are incorporated namely term life insurance which is funded by the organization or employer and whole life insurance which is funded by the members. The members are entitled to both the cash part of the policy and the cash value. The death benefit is a combination of both policies.
Group universal life plan: for this type of permanent group life insurance, the employee pays the premium and is given the liberty to choose what is covered and the amount of premium to be paid.
How to get qualified for a group life insurance
Some organizations or companies, require new members to stay and participate for some time before being incorporated into the group insurance policy. For instance, a newly employed individual may be required to work for the company for a period of saying one year probation period before the individual is included in the group insurance policy.
Coverage is only assured for as long as you are with the organization, if you leave the organization or company for any reason such as termination of contract or resignation, retirement, etc, the coverage is also terminated.
Features of group life insurance
There are three main features of group life insurance, they are;
- Master contract: all individuals partaking in the policy are bound by one master contract. The employer or organization who is interested in buying the policy contacts the insurance company and is given a contract.
The Premium is priced according to the number of persons covered, if the person increases so does the premium and vice versa
- Contributory: Although the employer takes care of the funding, the employees are allowed to contribute a little amount which goes to their contributory life insurance.
- Affordable: since the policy is bought as a single contract for a group the employers or organization gets it at a wholesale price.
Benefits of group life insurance
The benefits of this plan include:
- Death benefits are paid to the named beneficiary of a deceased member
- Banks and cash lending companies use group credit protection, so if a borrower falls back on payment, the insurance plan protects the bank or cash lending companies.
- Members are automatically included in the insurance plan.
- On retirement after working for some agreed years for the company, the group insurance enables the employers to be able to pay gratuity to the retiree
- It’s easy to pay your premiums as it is deducted from an employee’s paycheck ( in cases where the employees are required to pay), so there is no case of missed payment
- Funds from the policy are managed by experienced personnel from the insurance company.
Group insurance offers the easy to get benefits. Apart from the death benefits, there is also gratuity at the end of service.