- History and Development
- Meaning and Definition
- Features of Group Insurance
- Importance of Group Insurance
- Benefits of Group Insurance
- Difference between group insurance and sole insurance
- Principles or Assumptions of Group Insurance
- Group Insurance Schemes of Life Insurance Corporation
- Suitability of insurance plan,
It has been the main objective of Life Insurance Corporation of India that every insurable person in the country should get the benefit of life insurance. This facility must be available especially for the persons belonging to socially and economically backward classes. Therefore, the corporation accepted the idea of group insurance scheme for the weaker section of the society who could not pay the insurance premium regularly. Under this, such schemes have been implemented, from which life insurance protection can be provided at a low cost. Apart from employees working in offices and factories, such group schemes were also started for rickshaw pullers, milk vendors, fishermen, Harijans etc.
Group insurance has also evolved to meet business needs. It is a way of providing group security to persons working in business organizations. Group insurance plan has become very important in the modern era only to protect against the increasing risks in the business sector. Simultaneously, under the group insurance scheme, many service employers of the country can provide unique financial security to the dependents of their families in the event of the death of the employees by making group insurance on the life of their employees.
Life Insurance Corporation of our country operates various types of life insurance plans. The main plans are of two types, first term insurance plan and second pure endowment insurance plan. Under the term insurance plan, the Life Insurance Corporation has selected a few. Provides financial security in case of death of the insured during the term. Under the Pure Endowment Insurance Plan, financial security is provided in the event of survival of the insured during the chosen period. All other insurance plans of the Corporation are a combination of term and net endowment insurance plans. Life Insurance Corporation also operates group insurance plans.
A group insurance plan is a scheme under which insurance cover is provided to several persons in a single insurance contract. It is a contract of insurance between the insurer and the employer. In which the premium is paid by the employer or both the employer and the employee together. Group insurance is insurance for a group of people and not for an individual. The meaning of group insurance can be clarified on the basis of definitions given by strange scholars. The main definitions of group insurance are as follows –
- According to Prof. Angel – “Group insurance is a scheme to insure a group of individuals, in which the selection of lives is not done on an individual basis.
- According to the Federation of Insurance Institutes of India – ‘Group Insurance, A plan of insurance that provides protection to many people under a single contract.
- Conclusion – From studying these definitions it becomes clear that group insurance plan is a scheme of insurance in which protection is provided to a group of people while those people are not insured on an individual basis. In this, insurance cover is provided for multiple lives in a single insurance contract and the group is usually based in wholeness.
- The following are the characteristics of group insurance –
- Different from individual life insurance plan – Group insurance plan is different from individual insurance plan, because under this plan the insurance contract is not between the individual and the insurance company and the personal freedom to insure is not obtained. Under this scheme, the insurance contract is between the employer or organization and the insurer and the group is selected for insurance, not an individual.
- Sum Assured – The sum insured of each person to be included in the group is determined by a formula or table. Keeping in mind the person’s salary, category, post or annual salary etc., his sum insured is determined.
- Determination of premiums – Under the group insurance scheme, the premium is determined keeping in mind the occupation, nature, working conditions, employment conditions and occupational indications. The rate of premium is also determined on the basis of past claims and expenses experience. Individual insurability or ineligibility is not made the basis for determination of premium.
- Payment of premium – The premiums payable under group insurance can be paid by both the employer and the employee together or only by the employer. When the premiums are paid by the employer and the employee together, such a group insurance plan is called a contributory plan. In this scheme, 75% of the premium amount is paid by the employees and 25% by the employer. The premium payment under group insurance plan can be yearly, half-yearly, quarterly and monthly.
- Settlement of Death Claims – In the event of the death of a person covered under the Group Insurance Scheme, the employer has to produce a satisfactory certificate of death. The claim form has to be filled and the leave record of the deceased for the last three years also has to be sent to the corporation office. Thereafter the claims are settled.
- Issuance of Principal Policy – A group insurance plan is a scheme in which the insurance company instead of issuing a policy to each member of the group, issues a principal policy. In this policy, all the conditions related to the insurance plan and the facilities available are mentioned.
- Right to cancel the insurance – The corporation reserves the right to cancel the insurance if the number of persons joining the group insurance scheme is not sufficient.
- Choice of Group – Group choice of risk is an important feature of a group insurance plan. The objective of the insurer behind the collective election is to select such a group of persons for insurance which is favorable to a certain probable rate of death. Following are some of the conditions for the selection of the group –
- Under this group only the employee will be selected for insurance who is actually engaged in the work and has rendered service to the employer for a certain period.
- In the selection of the group, only special groups are considered eligible for this scheme such as employer and employee group, labor union group, creditor debtor group, voluntary organization group.
- The group is not selected on the basis of the health and habits of the individuals, but on the basis of that person being a part of that group.
- The employer of the group of persons selected for insurance is the same who is willing to work for the group insured.
- Generally only those persons who are in regular employment are included collectively under this scheme. Although at present, groups of rickshaw pullers, milk producers, fishermen, weavers, beedi makers etc. have also started getting the benefit of this scheme.
- Reduction in Costs – Group Insurance plans are quite economical as compared to other insurance plans. It has very less administrative expenses. A policy has to be prepared for the whole group. Calculation and recovery of premium is also done at low cost. The commission rates on premiums are also low. These savings result in significant reduction in the premium amount to be charged.
- Other Features –
- By contract between the group insurer and the employer or representative of the group.
- In this group insurance, risk is selected considering the group as a unit.
- The proper number of people in the group is usually 50.
- The newcomers to the group have to remain in the group for some period before they can be insured.
- It is mandatory to insure almost all or most of the insurable persons in the group. In the group insurance to be done from the contribution of the employees, at least 75% of the employees are required to be included in this scheme.
- A group insurance letter is issued under this insurance, which is called ‘master insurance letter’.
The achievements of Life Insurance Corporation of India in the field of group insurance have been very encouraging, many schemes have been started not only for the employees but also for other organized class persons like rickshaw pullers, weavers etc. Apart from this, beedi workers, porters etc. have also been given the benefit of this scheme. Therefore, it can be said that the group insurance scheme is an innovative scheme for the protection of the weaker sections of the people. The importance of this scheme can be clarified from the following points –
- Protection to the weaker sections – Life Insurance Corporation of India has been successful in providing protection to the weaker sections with the help of group insurance scheme. Under this scheme, sanitation and manual labor workers, rickshaw pullers and Harijans etc. are insured by the corporation.
- Reduction in insurance costs – The cost of insurance comes down due to non-essential health check-up, issuance of the principal policy, less cost in collecting premium, less commission per unit and facilities provided by the government. As a result it is possible to drop the insurance cover at a lower cost.
- Expansion of social security – Under this insurance scheme, the facility of providing insurance to all employees at normal premium rate has expanded social security.
- Increase in employee welfare – Normally the premium under group insurance scheme is paid by the employer itself. Hence the welfare of the employees increases. As a result, they work diligently.
- Exemption in taxes – It is the belief of the government that group insurance scheme extends social security. As a result, the government provides tax concessions to the organizations participating in such schemes.
- Facility of insurance – Under this scheme, the facility of getting insurance is also available to such persons who are not completely healthy because under this scheme the physical and mental qualities of the person are not made the basis of insurance. All those persons who are members of a group are insurable.
- Moral upliftment – The employee’s self-confidence increases due to the security of the group insurance scheme. As a result, he performs the work faithfully, so that his efficiency also improves.
- Help in creation of industrial environment – Creation of conducive environment in any industry depends upon the relationship between employer and employee. If their mutual relations are cordial then the industrial environment becomes favorable and the employees start working diligently. Because group insurance scheme helps in improving the relationship between employee and employer, the industrial environment improves.
- Fulfillment of Social Responsibility – With the help of group insurance scheme, the employer can meet certain important needs of the employee. It is the responsibility of the employer to provide timely assistance to his employees in case of accident, illness, disability etc. With the help of group insurance scheme, this assistance can be done without any hassle.
Group insurance plan is a very beneficial insurance plan. This scheme has special importance in the business sector. By implementing this scheme, the employer not only makes arrangements to fulfill his statutory obligations, but he is also able to fulfill his social obligations properly. It benefits the workers in many ways. The main advantages of a group insurance plan are as follows –
- Arrangement of statutory liabilities – By adopting a group insurance plan, the employer can arrange some of his statutory obligations. For example, paying gratuity is the statutory obligation of the employer. Gratuity payment can be arranged under group insurance scheme. This does not put a burden on the funds of the organization at the same time. As the employee retires or dies, the amount of gratuity is paid by the insurer.
- Insurance of all – There is also an advantage of group insurance that almost all the employees are insured under this scheme. In this plan, the health check-up of every individual is not done like individual insurance. As a result, all the employees can be easily insured.
- Motivation – The employer can motivate his employees by starting a group insurance scheme. Employees feel more secure when this scheme is implemented. This motivates them to do more work.
- Saving of Medical Examination Expenses – Medical examination is generally not required in a group insurance plan. Hence, it saves expenses.
- Facility to the dependents of the insured – The dependents of the insured also get the facility from this scheme. No tax is payable on any amount received by the dependents or heirs of the insured employee under this scheme.
- No special burden on the employers – There is no special burden on the employer by implementing the group insurance scheme. The reason for this is that the premium paid under a group insurance plan is deducted while computing the size. Thus, there is no significant impact on the total profits of the employer.
- Improvement in labor relations – Group insurance scheme gives motivation to the employees. and bring about a change in the attitude of the employers. Due to this, the feeling of belonging towards the organization also develops among the workers. As a result, good labor relations develop in the industries.
The difference between group insurance and sole insurance can be explained from the following points:-
|Basis of |
|Group Insurance||Sole Insurance|
|Meaning||Group insurance is the insurance of a group of people.||Sole insurance is the insurance of protection of a particular person|
|Benefits||In group insurance, many people get the benefit of insurance from the same contract.||In sole insurance, a particular person gets the benefit of insurance|
|Parties||The contract of group insurance is between the insurer and the employers or representatives of the group.||In sole trade, the contract is between the insurer and the insured|
|Letter of Insurance||The letter of insurance issued for group insurance is called “master letter of insurance”.||There is no special name given to the letter of insurance|
|Health Examination||There is no health examination of individuals in group insurance.||In sole insurance, generally everyone has a health exam|
|Change of Insured||Group insurance is a continuous insurance policy in which some new insureds are included every year and some old insureds are excluded||Solitary insurance is the insurance for the life of an individual which lasts for the rest of his life or till the end of the term of insurance. In this the insured remains the same.|
|Payment of Premium||In group insurance, the premium is usually paid by the employer of the group and the people of the group||In Kaki Insurance, the premium is generally paid by the insured|
|Social Security||Group insurance promotes social security||Lonely insurance promotes self-protection or family protection|
Group insurance plans are started keeping in mind certain principles and assumptions. The group insurance scheme has been successful only when it is based on these assumptions. Some of the beliefs and principles are as follows –
- Principle of Continuity – The group insuring the group is in flux. Some new members keep joining in the members of that group and some old members keep leaving. In fact, some new employees come to the organization and some employees leave after retirement. Group insurance is easily effective in such organizations.
- Principle of Minimum Choice – This principle states that the insurer should not have the right to choose the insured from among the group of people.
- Principle of Group Purpose – Group insurance is done keeping in mind the objectives of the group and not the individual objectives. Therefore, no group or organization should be formed for the purpose of getting group insurance.
- The principle of proof of inscrutability – Medical examination is not required in group insurance, but if some of the members of an organization do not join the group insurance scheme at first but want to join after some time, then they may do . But before such members are included in the group insurance scheme, their inscrutability is checked and insurance eligibility proof has to be obtained from the doctor.
- Principle of Proportion – This principle states that the proportion of premium of each group depends on the sum insured of that group, size of the group, average age etc.
- The principle of determination of profit – The principle of determination of profit of group insurance says that in group insurance, the determination of insurance benefits is done on the basis of group and not on individual basis. All members of group insurance get equal benefits.
Life Insurance Corporation of India has started many schemes of group insurance. Some of the major schemes are as follows –
- Group Gratuity Scheme – The Payment of Gratuity Act 1972 is prevalent in India, which is applicable to certain types of undertakings, industrial organizations, shops, clubs etc. In accordance with the provisions of this Act, every employee who has rendered five years or more of service shall, on his (i) retirement or (ii) resignation or dismissal or death or (iii) permanent In case of disqualification, there is a right to receive the amount of gratuity. (iv) In case of death and permanent disablement, the condition of minimum length of service also does not apply. The amount of gratuity is calculated at the rate of 15/26 of the monthly salary for each completed year of service, but the total amount of gratuity cannot exceed Rs.3.50 lakh. Life Insurance Corporation is a recognized insurer in which insurance can be taken for payment of gratuity. Life Insurance Corporation of India has started two gratuity schemes for this which are as follows –
- Pure Endowment Scheme – According to this scheme, any employer who has at least 10 employees can take this insurance letter. For this, the employer has to pay a premium, in return for which an endowment insurance letter is issued. The amount of this insurance letter is the same. As much as the employer has to pay the gratuity amount to his employee at the time of retirement. To get this scheme renewed at the beginning of every year, the organization has to send the latest salary information of its existing employees and all the information regarding new employees. On the retirement of the employees, the gratuity is calculated and paid on the basis of their last salary. If an employee leaves the organization before retirement and he is not entitled to receive ex-gratia, then the premium deposited for him is returned along with interest.
- Cash Collection Scheme – This scheme can be adopted by only those employers who have at least 100 employees and the first year premium is at least Rs 1 lakh. Under this scheme, the corporation decides the ex-gratia amount on the basis of the total amount collected. In this scheme, the amount received as premium is deposited in a separate account, in this amount interest and bonus amount is also added every year at a fixed rate of interest. Thereafter, from this amount expenses, if any, are deducted. Whenever the obligation to pay the gratuity amount arises, payment is made from this account. In this method the information regarding the employees is collected once in 3 years.
- Arrangement of Death Benefit – The corporation has now also made such an arrangement that if the employer wants, he can also arrange the gratuity amount for the entire service period on the accidental death of his employees. In the gratuity insurance plan, it can be arranged that the employee can be paid the gratuity amount for his entire predetermined service period. The corporation charges some additional premium for this arrangement.
- Benefits – The main benefits of the group insurance scheme are as follows –
- Benefits to the employers –
- Savings in Income Tax – The entire premium deposited in the scheme is considered as a managerial expense in the Income Tax Act. Hence, the entire amount of premium is deducted while computing the total taxable income.
- Fulfillment of Statutory Liability – By getting insurance under this scheme, the employer can fulfill his statutory obligation.
- Employee turnover limited – In the institutions where there is such a system of gratuity payment, the employees want to work permanently. This also limits employee turnover. Due to this the expenditure on new recruitment, selection, training etc. of employees in the organization remains limited.
- Benefits to employees –
- The payment of gratuity amount is ensured.
- Lifelong gratuity amount (if there is a provision for death benefit) can be received by the dependents even in the event of death.
- Retired. Superannuation Insurance Scheme – When a person retires or completes the period of superannuation, he also stops getting salary. But there is always a need for continuous income to meet his needs. To maintain the continuity of income, Life Insurance Corporation has also developed a similar scheme which is known as Group Pension Insurance Scheme. Under this scheme, the employee starts getting regular income from the day of retirement. The main features of this scheme are as follows-
- Purpose – The main objective of this scheme is to provide pension to the employees immediately after their retirement.
- Period of Pension – Under this scheme, the employee can choose any of the following three options to get pension –
- Can get pension for life.
- Can opt for pension for a minimum period with lifelong pension option. In this, the insured gets pension for life. Also, if the insured dies early, then his dependents continue to receive the pension amount for that minimum period.
- He may, if he so desires, opt for pension in joint life time. With this, either the employee or his wife can get pension as long as they are alive. In this scheme, if the insured wishes, he can take the option of getting pension along with leaving the job. If the insured wishes, he can take pension after the end of the insurance period, which is called belated pension.
- Receive a lump sum amount – The employees receiving benefits under this scheme can also get a lump sum amount. Employees who receive gratuity amount can be given one-third of the pension amount in lump sum while other employees can get the right to receive half of the pension in lump-sum.
- Other Insurance Benefits – If the group of insureds is of 10 or more persons then the death risk of the group can also be insured in this superannuation plan. This insurance can be equal to two months’ salary for each year of future service of the employees and up to a maximum of Rs 3 lakh. The amount depends on the size of the group. This amount is used to pay higher pension on the death of the insured.
- Payment of Contribution – The contribution can be paid only by the employer or the employer and the employee together.
- Payment of benefits – When an employee retires or is about to die, the trust sends the information to the corporation. In this notice, the trust should also write which option of benefit is availed by the retired or deceased insured. When the corporation gets this information, payment of benefits to the retired employee or his dependents starts.
- Pension Schemes – Life Insurance Corporation has started the following two pension schemes –
- Money Purchase Scheme – Under this the rate of contribution is already fixed in proportion to the salary of the employees. The Corporation appropriates this contribution in such a way that the appropriate pension amount is received.
- Profit Purchase Scheme – Under this scheme, the employer determines the amount of pension in advance. The amount of pension is determined in proportion to the salary of the employee, then the corporation determines the required premium for it.
- Operation of the scheme – In order to operate the pension scheme, it is necessary to do the following things –
- First of all a trust should be formed for the operation of this scheme. For this proper trust deed should be prepared.
- Persons eligible for this trust should be appointed as trustees.
- Rules for the conduct of this trust should be framed in consultation with the Life Insurance Corporation.
- Necessary request should be made to the Commissioner of Income-tax for availing exemption of income-tax.
- Finally a master proposal should be sent to the Life Insurance Corporation. This proposal must be signed by all the trustees.
- After that every year, the information related to the salary and service of the employees should be sent. According to these changed information, the amount of premium should also be sent.
- Benefits of the scheme – The benefits of the pension scheme can be divided into two categories –
- Benefits to the employers – The following major benefits are available to the employers from this scheme –
- Acquisition of permanent employees – By implementing this scheme, the employer can get permanent employees. This saves the cost of hiring and training new employees.
- Replenishment of new employees – Organizations with security schemes like pensions become available to more employees than they are in service.
- Fulfillment of Social Responsibility – Employers can fulfill their big social responsibility by starting a pension scheme.
- Benefits to the employees –
- Security in old age – There is continuity of income in old age. Hence security is achieved.
- Income tax exemption – If the employee also contributes some contribution in this scheme, then he can get exemption under the Income Tax Act.
- Benefits Tax Free – The benefits received under this scheme are tax free. Dependents also do not have to pay taxes.
- Benefits to the employers – The following major benefits are available to the employers from this scheme –
- Savings Linked Group Limit Scheme – Some of the salient features of Life Insurance Corporation’s Savings Linked Group Insurance Scheme are as follows-
- Right to start the scheme – Only the employer can start this scheme. not employee.
- Eligibility – The following types of organizations can accept this scheme for their employees. Central and State Government Organizations. Central and State Government Undertakings. Boards, autonomous local bodies including municipalities and panchayats. Reputed public companies.
- Insurability – Every employee is insurable under this scheme irrespective of his health. For this the employees neither have to declare good health nor need any kind of medical examination. But no employee shall be insurable in the following cases –
- If that employee is absent in the organization due to medical reasons on the date of commencement of this scheme.
- If the employee has completed retirement age.
- Member strength – At least 25 employees or 75 percent of the employees of the organization (whichever is higher) should be ready to start this scheme. But if there is a large group of employees, then this percentage decreases. Sometimes in some special cases, less than 25 employee groups are also insured in this scheme and it is mandatory for every new employee to join this scheme.
- Categories of employees – Under this scheme, employees are divided into four categories for issuing insurance policy and a separate insurance letter is issued for each category of employees. The sum insured increases with the category as well as the sum insured increases with the increase in the number of group of employees. For organizations having less than 25 employees (without any category), a uniform sum insured is issued.
- Contribution – In this scheme, the contribution is made by the employee himself every month. In this, every employer should send the premium of the group insurance plan by 20th of every month. There is no grace day facility in this, but if there is a delay in it due to any reason, then interest is charged by the corporation on the delayed payment.
- Utilization of Contribution – About 1/3 of the total contribution amount received is deposited in Risk Premium Account. The amount in this account is used to pay the death claims for the whole year. Any balance left in this account at the end of the year will be written off in the same year and is not carried forward. The remaining 2/3 of the contribution is deposited in a separate account of the employee. 11 percent annual compound interest will also continue to be deposited in this account.
- Operation – This scheme is operated by the service provider only. He is the coordinator of this plan.
- Income tax exemption – Employees joining this scheme get exemption under section 88 of the Income Tax Act.
- Employees’ Deposit Linked Insurance Scheme In its place Group Insurance Scheme – In the background of this group insurance scheme, there are provisions of ‘Employees’ Provident Fund and Miscellaneous Provisions Act, 1952′. According to the provisions of this Act, it is the responsibility of every employer to deposit an amount equal to a certain percentage of his wage bill under the Employees’ Deposit Linked Insurance Scheme, every month for the purpose of insurance and its administration. From this amount a specified amount is paid on the death of the provident fund account holder. But this Act also provides that if an employer can make better alternative arrangements for insurance, then he will be exempted from contributing to this fund.
- Employees Deposit Linked Insurance Scheme – Employees Deposit Linked Insurance Scheme was started in the year 1976. This scheme provides insurance cover to all those employees who are covered under the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952. This is a statutory scheme which has to be implemented by all the employers to whom the said Act applies.
- Benefits under the scheme – Employees get insurance cover under the Employees’ Deposit Linked Insurance Scheme. The sum assured is payable to the heirs on the death of the insured. Sum Assured is equal to the average balance of 12 months in the Provident Fund account of the employee before the death of the employee.
- Contribution – The contribution in this scheme is paid by the employer. This contribution is also deposited along with the contribution of provident fund. This scheme is operated by the Provident Fund Commissioner only.
- Group Insurance Scheme in place of Employee Deposit Linked Insurance Scheme – In place of Employee Deposit Linked Insurance Scheme, Employers can get group insurance of employees under the Group Insurance Scheme run by the Corporation. It is known as Group Insurance Scheme instead of Employee Deposit Linked Insurance Scheme. Under this scheme, the Corporation has prepared two alternative insurance papers. The employer can take any one of these insurance policies. These two insureds are as follows:-
- Graded Insured – This insured can range from Rs 11000 to Rs 37000. The amount of insurance cover of any employee is determined on the basis of the length of his service and the amount of his salary. Whose salary and service will be more, in the same proportion his sum insured will also increase. But the sick sum of each employee must be at least Rs.11000.
- Uniform insurance policy – Such an insurance policy is of equal amount i.e. Rs 37000 for each employee. Both the insurance policies of the corporation are recognized by the Provident Fund Commissioner, which can be adopted by any employer in place of ‘Employee Deposit Linked Insurance Scheme’.
- The main features of this scheme are as follows-
- Eligibility – Employers covered under the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 can accept this insurance scheme.
- Number of Members – At least 20 employees of such employer are covered under the Provident Fund Scheme.
- Insurance premium – The insurance premium is calculated as a fixed percentage of the annual salary. This payment is made by the employer.
- Payment of claims – If the insured dies during the service period, the pre-determined sum assured is paid.
- Accident Insurance – Under this scheme, double accident benefit can also be obtained by paying some additional premium. In such a situation, in case of accidental death, double the sum assured is payable.
- Benefits of the scheme –
- This alternative scheme of the corporation has the following advantages: –
- Benefits to the employers –
- Its administration is simple.
- The settlement of claims under this scheme is also easy.
- The amount of premium paid by the employer is treated as ordinary business expense under the Income Tax Act.
- Benefits to employees –
- Employees get more benefits from this insurance as compared to the basic plan.
- New employees who currently do not have any balance in the Provident Fund account, they also get an insurance benefit of Rs 11000.
- Under the Uniform Insurance Policy, every employee gets an insurance cover of Rs 37000.
- Benefits to the employers –
- This alternative scheme of the corporation has the following advantages: –
- Group (Term) Insurance Scheme – One such group insurance plan is the Life Insurance Corporation’s Group (Term) Insurance Scheme. Which can be renewed annually. Under this insurance plan, the sum assured is paid when the insured dies during the term of the policy. The main points regarding this insured are as follows:-
- Group – The following groups can be insured under a group insurance scheme –
- Employer – Employee Group.
- a group of persons carrying on a similar occupation, profession or occupation.
- A group of 100 persons availing housing loan through an apex co-operative institution.
- A group of persons availing housing loan from any single public and joint sector institution.
- a group of persons taking loan from any co-operative institution or bank established by the employees of the same employer.
- any independent group of persons who are members of an association such as members of a co-operative credit society.
- Age – Under all the schemes of this scheme, the minimum age of the people of the group can be 18 years and maximum 60 years.
- Membership – There is a minimum number of members prescribed for various plans of group term insurance. A plan with the same sum insured must have a group of at least 25 persons while a graded plan must have a group of at least 50 persons.
- Determination of premium – Under this scheme, the premium is determined keeping in mind the size of the group, nature of business, working conditions, categories of employees, amount of loan etc.
- Payment of Premium – The insurance premium can be paid by the employer or the employee or both together. If the employer alone pays the entire premium, it is called a non-contributory plan. But if the employees also contribute in the payment of premium, then that plan is called a contribution plan.
- Involvement of employees – If group insurance is done under non-contribution scheme, then the employer has to cover all the employees, but if the contribution insurance scheme is implemented, then at least 75 percent of the insurable employees The employees should be willing to become a member of the scheme and once the group insurance scheme is started, it should be mandatory for the newly coming employees to join the scheme.
- Certificate – Employees can give birth certificate or school certificate for their age proof and their general insurability is checked for giving health certificate to the employees. The certificate of this inquiry is given by the self-employer. In this certificate, the employer has to certify that the employee is actively working while joining this scheme.
- Insurance related work – If any employer makes group insurance, then he should make rules for the operation of this scheme with the help of corporation and send necessary information related to employees, master proposal, copy of rules and check of first premium.
- Renewal of insurance policy – Under the group term insurance scheme, a policy of 1 year is issued. This insurance policy is renewed every year.
- Claims and Insurance Benefits – For making a claim under the group insurance scheme, the employer has to send the details of the member concerned. Along with this, the completed claim form and death certificate also have to be sent. The insurance corporation pays the claim after necessary action and double accident insurance benefit can be availed on payment of some additional premium. In such a case, in case of death due to accident, double the sum assured is payable.
- Income Tax Free – The premium paid under this scheme is considered as business expense and no income tax has to be paid on the sum assured received by the dependents.
- Group – The following groups can be insured under a group insurance scheme –
- Group Leave Encashment Scheme – Life Insurance Corporation has made a scheme for encashment of leave of employees. Under this scheme, a group insurance letter is issued which is equal to all the employees, its minimum amount can be Rs 5000 and maximum can be Rs 25000 per employee. Under this plan, the insurance benefit is payable when an employee leaves the company. In case of death, the nominee of the employee is also given an additional amount of the insured.
- Voluntary Retirement Group Insurance Scheme – Life Insurance Corporation has prepared a scheme for voluntary retirement of employees. Under this scheme, the employer issues an insurance policy and arranges for the pension of the voluntary retirement employee. Life Insurance Corporation also prepares this type of plan according to the requirement of the employers.
- Social Security Group Insurance Schemes – Understanding the importance of social security, the Government of India has started some group insurance schemes through Life Insurance Corporation. These schemes provide social security to the backward and below poverty line of the society. Such major schemes are as follows –
- Landless Agricultural Labor Group Insurance Scheme – This scheme is being run in the courtesy of the Central and State Governments. This scheme has been made for the protection of landless agricultural labor families all over India. In this, the head of every landless agricultural laborer family is insured.
- Group Insurance of Beneficiaries of Integrated Rural Development Program –The Government had implemented the Integrated Rural Development Program in 1980. Its objective is to improve the economic condition of those living below the poverty line.
- Social Security Fund Group Insurance Scheme – The Government of India has established a social security fund amounting to Rs.100 crore for the social security of the people belonging to the weaker sections of the society. From this fund, assistance is provided in insuring the people of the weaker sections. Under the Social Security Fund Group Insurance Scheme, group insurance is done for the people of the weaker sections of the society, through their union, cooperative societies or any government organization.
- Rural Group Insurance Schemes – In August 1995, the then Prime Minister of India implemented two rural group insurance schemes of Life Insurance Corporation of India which are as follows –
- General Insurance Scheme and
- Subsidized Insurance Scheme.
At present, Life Insurance Corporation is providing facilities of various types of insurance plans to the countrymen. These different types of insurance plans have been issued for different purposes and cater to the needs of different people, so it is difficult to answer which insurance plan is best. The suitability of the insurance plan has to be decided by the person insured himself in consultation with the insurance agent. For this the following factors need to be considered.
- Personal and Family Requirements: – The personal and family needs of every insured person are different from other persons. Therefore, the proposer should choose a suitable insurance cover keeping in mind his insurance needs like size of family, health occupation of self and wife, age, social status, number of dependents, standard of living, etc.
- Saving propensities: – The insurance plan should be such that it can help in saving for future needs while meeting the present needs well. Keep saving and the insured does not feel that burden, such an insurance plan is suitable.
- Ability to Pay Premium:- Determination of suitable insured is linked to the paying ability of the proposer. Premium paying capacity also helps in determining the sum insured. This capacity should be determined keeping in mind the present and future income prospects. Estimation of premium paying capacity should be accurate and practical so that the insurance plan can continue.
- Estimation of future liabilities: – Suitable insurance plan can be determined only when the proposer has properly assessed his future liabilities. These responsibilities are related to the education of children, marriage, income management for old age, housing arrangement etc. There are many obligations for which a large amount is required in one lump sum like marriage or for arranging the life of children. The best of an insurance plan should be determined keeping all these factors in mind.
- Other Components:- Insurance plans should be selected on the basis of their bestness to meet the social obligations towards the employees to pay the wealth tax, to repay the loan and to fulfill many such other purposes. In short, it can be said that a suitable insurance plan will be considered as the one whose cost will be less than the benefits and which will be helpful in meeting most of the needs. Therefore, keeping in mind the provisions of insurance term, premium rates, credit facilities, health examination etc., the appropriate policy should be decided.