Employees are the most valuable asset for any organisation. And thus, as an employer, we need to make sure that they are comfortable working with us. This is necessary also because “If you take care of your employees, then they will take care of your customers and ultimately your business,” as rightly said by the famous British Entrepreneur Richard Branson.
There are various fringe benefits available in this regard, however, the most popular of all these is Group Life Insurance, as it helps us as employers to connect with our employees fundamentally and emotionally. It enables us to convey that the company cares for them and that their loved ones won’t be alone in difficult times.
So, in this article, we bring to you all the key details you must know about Group Term Life Insurance as an employer.
First Off, What is Group Life Insurance?
A group life plan is an insurance policy that helps us as employers to provide our employees with comprehensive life insurance coverage. As the name suggests, these plans are meant for groups, and with a single policy, we can provide life insurance coverage to all our employees.
Group term life insurance plans provide a monetary aid called the death benefit if the employee passes away in an unfortunate incident. These plans help our employees’ families remain financially stable in grief and emotional distress.
Types of Group Life Insurance
Based on premium contribution, there are two types of group term life insurance plans –
- Contributory Group Term Plans – Under these plans, the employees need to pay a part of the premium to avail of the group term plan benefits.
- NonContributory Group Term Plans – Under these plans, we as employers make the full premium payment for the plan. The employees need not pay anything to avail the group term plan benefits.
What All Are Eligible for Group Term Life Insurance?
The following groups are eligible for getting a group term life insurance policy –
- Informal non-employee-employer groups
- Formal employee-employer groups
- Non-Banking Financial Institutions (NBFCs)
- Professional Groups
- Microfinance institutions
How Does a Group Term Life Insurance Work?
Below, we have explained the working of a group term plan in detail –
- The employers first assess the needs of their employees and choose a suitable group term plan.
- The insurance company issues the plan to cover all employees and make the employer the master of the insurance contract.
- The premium is paid either by the employer or by both employer and employee, depending upon the type of plan chosen. The premium is paid for 1 year.
- The employer can offer the employee an option to include their dependents under the plan, including their spouse, children, and parents. However, this can result in an additional premium.
- In case of unfortunate death of the employee, the insurance company provides the death proceeds to the nominated individual under the plan.
Why Should Employers Offer Group Insurance to Employees?
As an employer, we can enjoy the following benefits by offering a group term life insurance plan to our employees –
- Boost Employee Motivation – When we offer fringe benefits like a group term plan, we convey to our employees that we care for them and their loved ones. This has an emotional impact on them and helps boost their morale and motivation levels to work even harder for the company’s goals.
- Increase Employee Productivity – The higher the motivation level of the employees, the greater their productivity and the higher the company’s revenues. Thus, by offering group term plans, we can increase our employees’ efficiency and, ultimately, the company’s profit levels.
- Low Employee Turnover – Employee turnover rate refers to the percentage of employees who resign from the company. The lower the employee turnover rate, the better it is for the business. Group term plans help us keep the attrition rate low as when we offer these plans, they feel valued and belong to the workplace, and there is a low probability that they would wish to leave such a cordial work environment. This also saves us from recurring recruitment expenses.
- Company’s Brand Appreciation – Happy and valued employees help in appreciating the brand name of the company in the job market. This helps us become a favourable employer for our potential employees. This also enables us to build goodwill for the organisation, which can affect the company valuation when acquiring funding.
Are There Any Tax Benefits Available With Group Life Plans?
Yes, there are tax benefits available to us as employers for providing a group term plan to our employees. The premium payable towards a group term life insurance is considered a business expense and is thus exempted from tax under Section 37 of the Income Tax Act.
Group life insurance has become a default fringe benefit expectation of employees, and thus, we as employers must provide them to keep their motivation levels high. Besides increasing employees’ motivation, these plans help us establish an interpersonal connection with our employees, making them feel they belong in the workplace. When employees feel like they belong, they work for the company and are determined and act lean when making costing decisions.