Group Life Insurance and How It Works II

By Ope Osiyemi | 2 min read
13th March 2019
Group Life Insurance and How It Works II

Group life policy can be taken for a group of people who may not necessarily be employer-employee groups. This type of insurance is a proven and reliable way to cater for the dependents of an employers' workforce. The benefit of Group Life Insurance is typically a minimum of three times an employee's annual emolument (Basic Salary, Transport and housing allowance).

Who pays the premium for the policy?

The employer generally pays the premium of the group term life insurance policy. However, there is an option of contributions by employees which they can easily offer to make through the deducted amount from their paychecks every month. The premium amounts are not fixed and depend on the size of the organization and the age of the individuals included in it. The members can be added or removed accordingly at any time of the year.

Policy Benefits

Group life policy is cheaper than individual life policy. This policy affords employers an opportunity to effect a policy that benefits their workforce while ensuring financial security for their employees’ families in unfortunate circumstances.

Additional advantages of group life insurance include:

  • Gratuity liability towards each employee is easy to fund under the policy cover
  • Employers can leverage group term insurance policies together with gratuity benefits
  • Where chosen fund performs well, it proves to be more economical

How to Leverage Group Life Insurance?

To leverage the group term life insurance policy, certain steps need to be followed. It is always better to be aware of the procedure to adequately leverage the policy including the claim settlement to engage in a hassle-free process.

Step 1: Decide the Sum Assured

Your total sum assured for the plan will depend on the way you offer the cover to your employees.

You can follow any one of the following methods, based on your organizational structure and objectives:

  • Flat cover for all the employees (best fitted for small organizations, Start-ups, etc.)
  • Salary Multiple (better fitted for companies with varying compensations for same level employees)
  • Graded cover (suitable for large organizations with multiple hierarchies)

Accordingly, you may choose a lump sum amount as sum assured or link it to the salary or loan account of the employee.

Step 2: Select the Riders

Riders are additional benefits that can be added to the term policy. For example, accidental benefit or critical illness cover.

You may also opt to offer the option of settling car and home loans of the employees through the life insurer if they lose their life.

Step 3: Premium Estimate

Once you have finalized a sum assured and rider benefits, your insurance advisor can estimate a premium based on the industry, number of employees, and average age of the employees.

The premium for leveraging only the base policy will be lower than the premium for life cover plus riders.

Step 4: Payment of the Premium

After fixing the sum assured and the rider benefits, you need to complete the documentation and pay the premium of the policy.

All employees are covered under it for the tenure of one year.

The policy is renewable annually, your next premium will depend on the claim history in the first year and any addition or reduction in the number of employees to be covered.

This type of insurance is a proven and reliable way to provide for the dependents of an employers' workforce.    

Group insurance policy benefit is three times an employee's annual emolument (Basic Salary, Transport and housing allowance)

Insurance is your friend, get in touch with a trusted agent or broker today.

Ope Osiyemi
Ope' Osiyemi is at the fore of negotiating better outcomes for the insurance sector in Africa working with business leaders and professionals in the industry. At her core, is a passion for creating sustainable value in people relationships and in the restoration of the dignity, global relevance and competitiveness of insurance in Africa. She does this by advocating policy reforms, strengthening the insurance workforce, driving insurance digital transformation and innovation, through business intelligence and strategy consulting; and dealing in her specialization, Oil and Gas insurance. She is an Energy Risk Expert, Co-Founder of Claimsify and the Managing Director, EdgeEdwards Company Limited. She’s certified in London Market Insurance, holds a B.Sc in Insurance from the University of Lagos, and an MBA in Oil and Gas Management from the University of Dundee, Scotland, United Kingdom.
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