Group Insurance - Gaining popularity among employers.

Introduction

Group insurance is a term that is becoming very popular these days. As the name suggests, it is an insurance that covers the risks of a group rather than an individual. Group insurance refers to a policy purchased by employers, organizations, or associations for a group of people that are a part of them and share similar kinds of risks. The document containing the terms and conditions for an insurance claim is known as an insurance policy. A group insurance policy can provide coverage for life risks, travel risks, or health expenses for the members of a group. Employers purchase group insurance policies for their employees and pay premiums on their behalf.

Why do employers pay premiums to cover the risks of their employees?

Employers purchase group insurance policies as a part of the employee benefits package. They provide these packages to retain talented employees in their organizations. Talented employees are the assets of a company and this type of coverage provides employees with a feeling of being valued and appreciated. It develops a sense of security and job satisfaction in the minds of employees, and as a result of it, they work more efficiently and enthusiastically. Moreover, group insurance policies are eligible for tax deductions u/s 80C of the Income Tax Act, of 1961. Thus, these policies help employers reduce the burden of the tax. A group insurance policy has numerous additional benefits.

Features of a group insurance policy

• It provides coverage to all the members of a group irrespective of their number.
• This policy covers several plans such as group health insurance, group life insurance, group personal accident insurance, or group travel insurance.
• The member of this policy is insured till he or she is part of an organization.
• It provides standard coverage to all the members of the group, as it is purchased by an employer this standard coverage is selected by him at his convenience.
• The admin of the cover gets the master policy in the name of the company. He may be any person or company with which the insured company has contracted to handle enrolments of employees as well as their dependents.

Eligibility criteria

• All members of the group must be the whole-time active workers of the organization.
• The minimum age requirement is 18 years.
• Maximum age varies between 60 and 80 years.

Advantages of a group insurance policy

It is very easy to purchase this policy as it has fewer stringent requirements. No medical underwriting is required, and fewer medical examinations need to be passed to purchase this policy. It provides comprehensive coverage to all members of a group, like dental, health, life, etc. Rates of premium are lower as compared to an individual policy. Besides, these policies can also be converted into individual policies in case an employee leaves a job and wants to continue paying his policy premiums. This can be done through COBRA's comprehensive coverage.

COBRA Policy

COBRA stands for Consolidated Omnibus Budget Reconciliation Act, which allows the same health coverage that an employee had before losing his job. However, it is comparatively expensive. Any person who leaves the job can continue to have the benefits of a group insurance policy by converting it into an individual policy.

It is to be noted that only eligible employees can convert their group insurance policy to an individual policy. An employee must have been fired, retired or quit the job or have the work hours cut to the point that he is not eligible for a group insurance policy. These are known as the qualifying events for having a COBRA policy. The employee has to decide within 60 days whether he wants to continue the same policy, otherwise, his coverage will be ended on the same day he left the job. The COBRA coverage lasts for 18 or 36 months depending upon the qualifying event that made a person eligible for this coverage.

Disadvantages of a group insurance policy

Every coin has two sides, and group insurance is no exception. There are also some drawbacks. It provides limited coverage options, and some employees may not be found suitable for that particular coverage. Employees have less control over their insurance coverage as these are purchased by their employers according to their convenience and tax benefits. Group insurance is typically tied to employment. It means that when an employee leaves his job, he is not eligible to avail himself of the benefits of this policy, and COBRA combination coverage is very expensive, so every employee cannot afford it. Moreover, there are many conditions and requirements to be eligible for COBRA policy.

Conclusion

Despite these minor drawbacks, group insurance is very beneficial for employers and employees alike. Employers can retain talent in their organization and can have tax benefits under the income tax act. While on the other hand, employees can reduce the burden of losses and risks in unprecedented life events.