Small and medium businesses are vulnerable to any minor catastrophic event. Particularly startups are heavily dependent on their employees for their success and if anything were to happen to employees they would be at the receiving end. Bootstrapped companies are a level high when compared to these SME businesses as the owners invest their own money and the stakes are high.
In such cases, it is very important for SME businesses to recruit and at the same time retain the top talent. Since the SME businesses are not cash rich, they need to be frugal and at the same time attract and retain top talent. For this they should offer attractive packages as well as employee benefits.
Most individuals are now ready to work for less salary but get a peaceful working environment and even people are ready to take a salary cut for remote working. In addition to these benefits employers offer insurance plans to their employees. In this article we discuss the top 5 ways in which a group term life insurance plan would help your SME businesses, mainly startup companies.
- No Medical Checkups: The first and foremost advantage of offering group term insurance to employees is that it doesn’t require pre-policy medical checkup. Employees need not undergo any kind of medical checkup to get insured under the group term life insurance policy. In general insurance companies would demand a health checkup before issuing a term life insurance plan and the process of undergoing checkup to take the policy would be tiresome, especially if the checkup is not telemedical.
However it would also not be feasible for the insurance company to conduct the pre-policy medical checkup for a large number of employees to be insured under the group term life insurance policy. The other advantage is that employees with pre-existing conditions would also be covered under a group term life insurance plan without any hassle. The same employees with a pre-existing condition would have to undergo a rigorous process to obtain an individual term life plan.
- Cost Effective: A group term life insurance plan is cheap when compared to an individual plan. The premium to be paid in a group term life insurance plan is far less than that of any other group insurance plans. Since a group term life insurance plan covers many individuals, the premiums are less when compared to individual plans.
- Customisable: A group term life insurance plan can be customized as per the needs and requirements of the individuals. An individual term life plan is fixed in nature and one cannot alter the plan as per their requirements except for opting for additional coverage in the form of add-ons or riders. But in case of a group term life insurance one can customize the plan as per the needs and requirements.
Add-ons or riders such as education allowance, repatriation allowance, accidental death and disability benefit, etc. can be availed under a group term life insurance plan.
- Attracting and Retaining Talent: A Startup or MSME business is heavily Employee dependent and it is very difficult to recruit and retain the correct talent these days. Keeping this in mind one should always opt for a value providing group term life insurance plan as it would help the businesses recruit and retain the correct talent.
In addition having a group term life insurance plan would also provide peace of mind to both the employees as well as the employer. Employees would be assured that their family would be taken care of by the claim proceedings in case of their sudden demise.
- Tax Benefits: A group term life insurance plan offers tax benefits to both employees as well as employers. As per the existing laws, the death benefits paid under a group term life insurance policy are exempted from income tax under Section 10(10D) of income tax act.
The premiums paid by the employers could also be claimed for tax exemption under the employee benefits section. All the employee benefits provided by the employer could become eligible for tax exemption under the income tax act.
FAQs:
- What Is the Entry Age in a Group Term Insurance?
The minimum entry age in a group term insurance plan starts at 18 years and there is no maximum entry age. The maximum entry age could be adjusted based on the age of the employees insured under the plan. Employees as old as 69 years could also be insured under a group term life insurance plan subject to underwriting conditions.
- How Is the Premium Decided in a Group Term Life Plan?
The premium in a group term life insurance plan is decided based on the following factors.
- Sum assured or coverage required per employee.
- Age of the employees.
- Occupation of the employees.
- Previous claim ratio.
- How to Port a Group Term Life Insurance Policy?
There is no need to port a group term life insurance policy as you can simply change the insurance company by opting for another insurance company. Porting is useful when there are accumulated benefits under the policy.
- Is it Necessary to Have a Separate Term Life Plan When My Employer Is Offering a Group Term Life Insurance Plan?
Yes. It is absolutely necessary to have a separate term life insurance plan even when your employer is offering you a group term life insurance plan. It is necessary because your life cover would only be valid as long as you are with that employer and sometimes in the workforce.
- What Is the Tenure of a Group Term Life Insurance Plan?
A group term life insurance plan is valid for a period of 12 months after which it has to be renewed. Here are the details that should be submitted for availing/renewing a group term plan:-
- List of details of all the employees to be insured which includes the age, date of birth, designation, sum assured required for each employee.
- KYC documents of the insured customer.
- Previous claim history in the form of claims dump (if any).
