Vital Role of Group Insurance Schemes in Financial Protection and Security

Group insurance schemes play a crucial role in providing financial protection and security to a collective of individuals, whether they are employees of a company or members of an organization. These schemes encompass various forms of coverage tailored to meet different needs and circumstances. Let’s delve into the different types of group insurance schemes available:

I. Group Insurance Scheme – One Year Renewable Group Term Insurance Plan:

• This plan primarily provides protection against death, making it a fundamental and affordable form of coverage.
• It is often utilized to cover the liabilities of borrowers, offering financial security in the event of unexpected death.
• Premiums can be calculated based on individual ages or on an average basis, depending on the scheme.
• Some schemes may incorporate profit-sharing arrangements to benefit a large number of beneficiaries.
• Sum assured (SA) under this scheme may be fixed, graded, increasing, or decreasing, catering to diverse needs.

II. Group Savings – Linked Insurance:

• Combining risk cover with savings benefits, this scheme involves monthly contributions, typically deducted from employees’ salaries.
• Employers may contribute to the risk premium partially or in full.
• After deducting the risk premium for insurance cover, the remaining amount is credited to individuals’ savings accounts.
• In case of death, beneficiaries receive the insurance amount along with accumulated savings and interest.
• Upon survival until the exit date from service, individuals receive their savings with accrued interest.

III. Group Gratuity Scheme:

• Gratuity payments can be made through the “Pay as you go” method or from an approved gratuity trust.
• Group gratuity schemes offer advantages such as guaranteeing gratuity amounts, tax-free interest, actuarial advice, and reduced tax liability.
• Employers can manage cash flow efficiently, and profits remain unaffected upon employees’ exit.

IV. Group Superannuation Scheme:

• Designed for employers willing to provide pension benefits, this scheme facilitates pension fund administration.
• Insurer-offered schemes provide easier administration and access to actuarial and investment expertise.
• Schemes can be defined benefit (DB) or defined contribution (DC) type, offering flexibility in pension provisions.

V. Group Annuity Scheme:

• In trustee-managed superannuation schemes, pension (annuity) must be purchased from a life insurer upon an employee’s exit.
• Employers seeking to provide annuity to ex-employees can opt for a Group Annuity Scheme, purchasing annuities directly from insurers.
• Lump sum premium payments enable the purchase of immediate annuities, ensuring a steady income stream for retirees.

In conclusion, these types of group insurance schemes cater to diverse needs, offering financial protection, savings, pension benefits, and annuity provisions to individuals and organizations alike. By understanding the features and benefits of each scheme, employers and individuals can make informed decisions to safeguard their financial well-being and plan for the future effectively.

Disclaimer:? We have taken due care and caution in compilation of this Newsletter. The information has been obtained from various reliable sources. However, it does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions of the results obtained from the use of such information. Investors should seek proper financial advice regarding the appropriateness of investing in any of the schemes stated, discussed or recommended in this newsletter and should realise that the statements regarding future prospects may or may not realise. Investments are subject to market risks. Please read the offer document carefully before investing. Past performance is for indicative purpose only and is not necessarily a guide to the future performance. Remember, financial decisions should align with your goals and risk tolerance. Consider consulting a financial advisor for personalized advice.

Finvest India