Richard Branson, the founder of the Virgin Group, once said, “Take care of your employees, and they’ll take care of your business.” Businesses should ensure employees’ physical, mental, and psychological well-being at the workplace and during employment.
For this reason, employers provide employees with employee benefits such as Gratuities, sick leaves, maternity benefits, and other working conditions as mandated by the Government of India. But nowadays, companies are even providing better employee benefits in the form of SOPs, Flexible work timings, health insurance, life insurance, and personal accident insurance.
While employers are to be appreciated for providing insurance coverage to their employees, it is also important for them to consider a few factors before selecting a group health insurance policy for their employees.
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Let us Discuss the Major Factors That a Business Owner or HR Must Consider Before Deciding on a Group Life Insurance Plan for Employees.
Cover Required
The first and foremost thing to decide is the coverage to be offered to the employees. Coverage in a group term life insurance is the sum assured under the policy for each employee. Employers can consider offering a flat sum assured to all the employees irrespective of their pay grade and designation or a graded sum insured based on the designation.
The business owner’s prerogative is deciding the coverage to be offered to the employees in a group term life insurance plan. In general, businesses take higher coverage for higher-grade employees, recognising their importance to the organization. In addition to the group term life insurance cover, employers may also consider keyman insurance plans for their key employees.
Compare & Buy
The premium is the amount you pay towards the group term life insurance policy. It is charged based on the number of members, age, occupancy, and sum assured. The premium also depends on the insurance company’s claims ratio. If the company has a high claim ratio, the premium will be higher than other insurance companies.
The higher the number of members and the higher the sum assured, the higher the premium under the group term life insurance policy. Employers should check the premiums from different insurance companies and decide on the affordable option.
Riders
A group term life insurance policy is usually offered as a plain vanilla option, and one can top up the policy with various riders or add-ons. Riders or add-ons are the extra benefits or coverage that can be availed under a group-term life insurance policy. Riders are designed to override the policy’s terms and conditions with better terms and conditions for the policyholder.
The insurer charges riders extra, which increases the scope of the policy. Some riders include personal accident, waiver of premium, critical illness, and terminal illness. Employers should decide on the required add-ons, as these would increase the overall premium to be paid under the policy.
Claim Settlement Ratio
Another important factor to consider is the insurance company’s claim settlement ratio. The claim settlement ratio is calculated as the number of claims made divided by the number of claims settled in a particular financial year. A higher claim settlement ratio means higher chances of getting a claim settled. Any claim settlement ratio above 95% is considered decent for insurance companies. One should also check the time an insurance company takes to settle a claim in the group-term life insurance policy.
Although the claim settlement ratio is not an exact measure of an insurer’s claim settlement capability, it is advisable also to check the insurer’s solvency ratio. The solvency ratio denotes the amount of capital an insurance company has compared to the risk it is taking. The solvency ratio checks whether the company can settle claims in adverse conditions.
Intermediary Selection
Many business owners and HRs consider, at most, the coverage and premium to be paid in a group-term life insurance policy but ignore the intermediary in the process. Intermediary selection is important in purchasing a group term life insurance policy. The intermediary can make or break the process of buying the policy.
Intermediaries could be individual agents, banks, insurance brokers, or online agents. Each one of them has their advantages and disadvantages. Insurance brokers have the advantage of providing multiple quotes from multiple insurance companies as they can tie up with any number of insurance companies. Insurance brokers such as Ethika Insurance would also provide risk management services to their clients based on their risk profile and offer free-of-cost add-ons from their ends, such as Red carpet claim assistance, Employee Engagement programs, Employee happiness programs, etc.
FAQs:
What is the waiver of premium riders for term life insurance?
A waiver of premium rider in term life insurance waives all future premiums payable by the insured in certain instances, such as disability or critical illness.
What is the policy term in group-term life insurance?
Any group term life insurance policy is issued for 12 months, after which the policyholder must renew it. Business owners may choose to insure with the same or a different insurer.
What are the details to be submitted for group term life insurance?
The following details should be submitted to avail of the group term life insurance plan:
1. Complete details of all employees working in the organization. Details should include age, date of birth, gender, employee code, sum assured required, etc.
2. KYC details of the organization.How do you pay premiums in group term life insurance?
A group-term life insurance plan allows you to pay the premiums online, offline, or in installments.
Is a pre-policy medical checkup required in group term life insurance?
No. Group term life insurance plans do not mandate a pre-policy medical checkup before the policy issuance.
