Group insurance

For insurance purposes what defines a group

Group Insurance Definition

Group insurance covers a group of people related to each other by some defined criteria, i.e., members of society or any professional association, employees of an entity, employees working under the same employer, etc. It can be life insurance, health insurance, or any other type of personal insurance.

Explanation

Group insurance is for a person created by pooling the people who are related to the same profession or same association or any other defined criteria. Many insurance companies have introduced such a scheme to provide the requirements of many specific groups like professionals in an organization, employer-employees, etc.

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Objectives

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#1 – Providing Investment Plans to Pay off Gratuity to the Employees

In the case of an organization, employees completing more than five years of service are eligible for the payment of gratuity. In this kind of scenario, the organization has the option within the group insurance plan to invest or create a corpus that one may use further to pay off the gratuity amount to the eligible employees.

#2 – Covers Term Insurances

In terms of insurance, the sum assured is paid off to the deceased’s family members in case of the person’s untimely death.

#3 – To Increase the Habit of Long Term Savings

It increases the habit of long-term savings for the members covered in this insurance, and these insurance or savings helps to cover the further future liability of the person, like marriage or education fees for the kids.

#4 – Annuity Facility

It provides superannuation schemes for employees for their retirement plans. In the scheme, the employees accumulate the premium throughout their service and get paid as a pension after retirement.

Characteristics

Some of the characteristics are as follows:

For such a policy, a group of individuals should be related to each other by some defined means.
In the case of this insurance, the effective cost comes less than if one would have taken the individual insurance. So in consideration of an organization, it is more effective as less paperwork, less controlling documents, less controlling personnel involvement, and effectively less cost to the organization.
In the case of this insurance, there is no risk based on classification or discrimination between the group members. There is no discrimination regarding gender or age etc. All persons charge the same premium amount that belongs to the same group insurance policy. Thus the plans are uniform and provide the same benefits to all the members.

Types of Group Insurance

There are different types that insurance companies offer to the related entity as per the requirement of the entity. For example, these schemes could be as follows:

#1 – Health/ Medical Insurance

Health insurance is for various entities like small and medium size enterprises, where an employer can get a group health insurance policy covering all of his employees, and the cost of the policy is quite low for SMEs as well.

#2 – Term Life Cover

This is provided the same as the Group Medical Insurance, and the premium amount for the insurance is deducted from the salary of the employees monthly (in case of the employer-employee group).

#3 – Personal Accident Insurance

Personal accident insurance covers the accidental death of the beneficiary as well as medical expenses along with partial or total disabilities. So, the beneficiary does not have to take other individual insurance covers for injuries or health issues for which he does not need hospitalization. This cover includes the charge and fees of doctors in such scenarios.

There are other group insurances as well like:

Group Pension Plans
Worker compensation insurance
Travel Insurance etc.

How does Group Insurance Work?

The head or group administrator enters the group insurance contract. The group administrator entered into a single contract with the insurance company, which will cover the insurance of all the group members. In addition, all the members would issue a certificate for proof of insurance. These contracts are only valid for the individual until he remains in the group; if he leaves the group, one will also discontinue the contract. The payment of premium for the insurance would be paid by the administrator, for which he will charge the respective amounts from the other members.

In case of any incident or query related to the insurance needs to be communicated, the respective beneficiary can directly contact the insurance company without looping the group administrator into the conversation.

Benefits

Mostly these policies provide lower costing to the group administrators and better insurance plans with wider coverage of conditions than individual insurance plans.
The group insurance offered by the management provides a better effective environment within the entity by providing the employees a morale boost and a healthy and good working environment.
The administrators taking these covers benefit from it as tax benefits also provided in the respective tax laws.
Also, these payments are made from the employee’s salary, so employees have a hassle-free way to submit the payments without filling out any other forms or going somewhere to pay the premium.
In the case of pension or superannuation schemes, the funds are managed by insurance companies and provide a greater return to the employees compared to the funds managed by the entity.

Limitations

The individual beneficiaries do not have any control over their portion of coverage of the policy.
It will discontinue the insurance contract if the beneficiary leaves the group, i.e., if an employee leaves the organization, the cover will be discontinued for him.
In this type of insurance, all are treated uniformly. It results in the same risks considered for every person, like for a healthy person and a seriously sick person. Therefore, the cover will be considered the same with the same terms and conditions.

Conclusion

The group insurance policy is a single policy taken for a group of people who are related to each other as the defined criteria in the terms and conditions of the cover. The group policy results in the reduced cost for the group head and the individual beneficiary with wider coverage of terms and conditions related to the cover. All the beneficiaries are judged uniformly without any discrimination.

What is an insurance company group?

Group insurance plans are most often business health insurance plans covering employees who work for the same large company. But there are also small business health insurance plans and group medical insurance for members of labor unions, professional associations, fraternal organizations, and advocacy groups.

What is group insurance quizlet?

plan that provides coverage to more than one person under one policy; usually written for employee-employer groups, and often annually renewable term; evidence of insurability not necessary if participant enrolls during open enrollment period; participants don't receive policy, but certificate of insurance, which ...