Group insurance is a type of insurance policy that covers a defined group of people, usually employees of a company, members of a society, association, or professional group. This policy is usually purchased by an employer or organization, and coverage is extended to all eligible members.
Key Features of Group Insurance
- Single Policy for All
A group insurance plan covers all members under a single master policy, eliminating the need for individual underwriting. - Lower Premiums
Premiums are usually lower compared to individual plans due to the risk being spread over a group. - No Medical Tests
Most group plans do not require medical tests, especially for base coverage amounts. - Optional Add-ons
Members can often buy additional optional coverage at a cost. - Employer Contribution
In most employment-based group insurance, the employer either fully or partially pays the premium.
Types of Group Insurance
- Group Health Insurance
Covers hospitalization, surgery, maternity, and outpatient expenses for employees and sometimes their dependents. - Group Life Insurance
Offers a lump sum to the nominee in case of the insured’s death during the policy term. - Group Term Insurance
A pure life cover with no maturity benefits. Often provided as a default benefit by employers. - Group Personal Accident Insurance
Covers accidental death and disability benefits. - Group Critical Illness Insurance
Provides a lump sum on diagnosis of critical illnesses like cancer, heart attack, etc. - Group Travel Insurance
For employees or members who frequently travel domestically or internationally.
Benefits of Group Insurance
For Employers/Organizations:
- Enhances employee loyalty and morale.
- Helps attract and retain talent.
- Offers tax benefits on premiums paid.
For Employees/Members:
- Cost-effective coverage.
- Easy enrollment and administration.
- No medical exam (in most cases).
- Can extend coverage to family at lower rates.
Limitations of Group Insurance
- Not Portable: Coverage ends when you leave the organization.
- Limited Customization: Benefits and sum insured are fixed by the group policy.
- Coverage Ceases on Retirement or Exit: You need to switch to an individual plan if you want continued protection.
How Does Group Insurance Work?
- The employer or group administrator ties up with an insurance provider.
- A master policy is issued.
- All eligible members are enrolled under the plan.
- Premiums are either borne fully by the employer or shared with employees.
- Claims are filed by individual members when a covered event occurs.
Is Group Insurance Enough?
While group insurance is a great benefit, it’s often not sufficient for full protection. For example:
- Health coverage may be limited (₹2–5 lakhs).
- Life cover is often 1–3 times your salary, which may not be adequate for family needs.
It’s always advisable to have individual policies to supplement your group coverage.
Tax Benefits
- Employers can claim tax deductions under Section 37(1) for premiums paid.
- Employees can claim tax exemption on benefits received under Section 10(10D) and Section 80D (for group health insurance if paid by the employee).
Group Insurance vs Individual Insurance
| Feature | Group Insurance | Individual Insurance |
|---|---|---|
| Premium Cost | Lower | Higher |
| Customization | Limited | Fully customizable |
| Portability | No | Yes |
| Medical Exam | Usually Not Required | Often Required |
| Policy Ownership | Employer/Organization | Individual |
FAQs
1. Who is eligible for group insurance?
Employees of a company, members of registered associations, professional bodies, or cooperatives are eligible for group insurance.
2. Is group insurance mandatory for employers?
In some countries like India, it’s mandatory for employers to provide group health insurance to employees (especially post-COVID-19). However, it varies by location and company policy.
3. What happens to my group insurance if I leave the job?
The coverage usually ceases immediately. Some insurers offer the option to convert it to an individual plan.
4. Can I include my family in a group health policy?
Yes, many group health insurance plans allow adding dependents like spouse, children, and sometimes parents at a nominal extra cost.
5. Is the coverage amount fixed for all?
Often yes, but some policies allow employees to opt for higher coverage by paying extra.
6. Do group insurance plans cover pre-existing diseases?
Yes, most group health policies cover pre-existing illnesses from day one, unlike individual plans.
7. Are group life and health insurance taxable?
The benefit received under group life insurance is tax-free. Premiums paid by the employer may be taxable perquisites in some cases.
8. Can retirees continue with the group plan?
Some organizations offer post-retirement coverage or conversion to individual plans, but it depends on company policy and insurer terms.
9. How do I claim under group insurance?
Submit a claim form along with required documents (hospital bills, death certificate, etc.) to the insurer through your HR or group admin.
10. Can freelancers or self-employed people get group insurance?
Yes, through professional associations, societies, or affinity groups.