What is Group Insurance?
Group life insurance is a type of life insurance in which a single contract covers an entire group of people. Typically, the policyowner is an employer or an entity such as a labor organization, and the policy covers the employees or members of the group. Group life insurance is often provided as part of a complete employee benefit package. In most cases, the cost of group coverage is far less than what the employees or members would pay for a similar amount of individual protection. So if you are offered group life insurance through your employer or another group, you should usually take it, especially if you have no other life insurance or if your personal coverage is inadequate.
As the policyowner, the employer or other entity keeps the actual insurance policy, known as the master contract. All of those who are covered typically receive a certificate of insurance that serves as proof of insurance but is not actually the insurance policy. As with other types of life insurance, group life insurance allows you to choose your beneficiary.
Term insurance is the most common form of group life insurance. Group term life is typically provided in the form of yearly renewable term insurance. When group term insurance is provided through your employer, the employer usually pays for most (and in some cases all) of the premiums. The amount of your coverage is typically equal to one or two times your annual salary.
Group term coverage remains in force until your employment is terminated or until the specific term of coverage ends. You may have the option of converting your group coverage to an individual policy if you leave your employer. However, most people choose not to do this because these conversion premiums tend to be much higher than premiums for comparable policies available to individuals. Typically, only those who are otherwise uninsurable take advantage of this conversion option.
Here are a few commonly provided Group Insurance in the Canadian market place.
- Basic Life Insurance
- Optional Life Insurance
- Supplemental Life Insurance
- Basic Dependent Life Insurance
- Optional Dependent Life Insurance
- Survivor Income Benefits
- Paid-Up Life Insurance
- Critical Illness Insurance
- Accidental Death and Dismemberment Insurance
- Short Term Disability Insurance
- Weekly Indemnity Insurance
- Sick Pay Programs
- Salary Continuance
- Long Term Disability Insurance
- Health Insurance
- Dental Insurance
Reasons for Providing a Group Insurance Plan
There are many reasons that an employer may wish to provide employee benefits through a group insurance plan for their employees including:
Advantages for Employees
- Demonstrating concern for the welfare of the employee and their family
- Reduce or eliminate the need for an employee to use after-tax income to purchase individual insurance products for protection
- No need for the employee to provide evidence of good health
- Group insurance is typically less expensive than individual insurance because the risk of loss is pooled among the entire group
Advantages for Employers
- Costs paid into a group insurance program are considered a tax deductible business expense
- Attracting and retaining talent
- Providing employee benefits for employees generally leads to a healthier workforce because employees have access to medical services when they need it usually at a lower out of pocket cost (depending on plan design)
- Employee benefits can be provided in exchange for some element of cash compensation
Group Insurance Conditions
For a group insurance plan to exist there needs to be an element of risk for a potential loss that can be measured and predictable. To arrange a group insurance policy the following key ingredients must be in place:
- Employees covered under the group insurance policy must be actively at work and working a minimum number of hours per week to be eligible (usually 20 or 24 hours)
- The amount of coverage and choices available must be restricted in some way
- Where employee contributions are required towards the costs of the group insurance plan, they must be deducted from the employee’s pay
- The employer must pay a portion of the costs towards the group insurance program
- The associated risk of loss must be spread among the group of employees covered
Elements of Group Insurance Policy
A group insurance policy is a legal contract between an employer or plan sponsor and an insurance company. The group insurance policy will outline the terms of the agreement between the two parties with details surrounding:
- When coverage begins and ends
- Who is eligible for coverage?
- Underwriting requirements under the program
- How premiums are to be calculated
- How the insurance company will administer the plan including setting up the policy, paying claims, invoicing for the premium due, etc.
I can help you set up a group insurance plan for your company from a small group of two employees to 2000 employees.
Please feel free to call or text me directly at 647-865-4063 or 905-369-0222 or email me at firstname.lastname@example.org