Group Term Insurance Plan for Employees
Group (term) Insurance Scheme is meant to provide life insurance protection to groups of people. Administration of the scheme is on group basis and cost is very low. Under Group (Term) Insurance Scheme, life insurance cover is allowed to all the members of a group subject to some simple insurability conditions without insisting upon any medical evidence. The restrictions under a Group Term Insurance Scheme mainly relate to size of the group, amount of cover allowable, minimum and maximum age limit for eligibility of cover (18 & 60), participation of minimum percentage (75%) of eligible members of the group at inception and compulsory participation of all new members.
Group (Term) Insurance Scheme is at present offered under One Year Renewable Group term assurance plan (OYRGTA). Every year on Annual Renewal date LIC charges the premium depending upon the changes in size and age distribution of the age group.
The Premium rates applicable to a group at commencement depend on its size as also the occupation, employment and working conditions of the members of the group. Subsequently, the Premium Rates may be reviewed on the basis of actual experience. In some schemes, a part of the excess of premium over actual claim is allowed as rebate from subsequent year’s premium as Experience Rating adjustment or Profit Sharing if the claim experience is favourable.
Group (term) Insurance Scheme has a number of varieties. The Scheme may provide for a uniform cover to all members of the group or graded covers for different categories of members.
General Features of various Group Insurance Schemes
MASTER POLICY: A single Master Policy is issued covering all the members of the scheme and the scheme is administered by the Employers.
PREMIUM: The premium under such scheme may be wholly paid by the employer. However, the scheme may be contributory i.e. the members may also contribute.
TAX BENEFIT: The premiums paid by the employer are allowed as business expenses and the amounts are not treated as perquisites in the hands of the employees. The premiums paid by the members are eligible for income-tax rebate under Section 80 C. The benefits paid under the scheme are tax-free.