Under the Group Insurance Scheme, the principle involved is more or less same as in the case of Life Insurance but the scheme is taken for a group of persons employed in an undertaking. In this scheme, the contract of life insurance can be summed up as an undertaking to pay specified amounts of money on the happening of certain contingencies in exchange for a previously agreed series of payments called premiums. This contract is between an employer and the Insurance Company and the contingencies where the death of employee in service or on survival to the retirement date. In the latter event the employer would possibly want some pension to be given for the post retirement life time of the employee. To offer cover of death risk, the system is to cover risk year by year. The employer is asked to pay the premium in advance and if death occurs the insurer pays the claim.
The Group Insurance portfolio is as such employer employee oriented i.e. Organisation Sector. This is because the employers feel the need to give insurance as one of the employee’s benefits. Also the group has the capacity to pay the premiums regularly. There are also different types of insurances under this scheme. The main schemes are given below:
1. Group Superannuation Scheme
Under this scheme a monthly pension is provided to the retired employee. The employee will have the option to choose any one of the types of pensions given below:
- A pension payable throughout his life-time.
- A pension payable during his lifetime but also guaranteed for a specific minimum number of years (5, 10 or 15). If he dies during the guaranteed period, the pension will continue to be paid to his beneficiary for the remaining part of the period.
- A pension payable during the joint lifetime of the employee and spouse and continued thereafter during the lifetime of the survivor.
2. Group Insurance Scheme
Under this scheme, the insurer will insure all the employees of the undertaking with the condition that the sum assured is payable on the death of the employee while in service. Premiums towards the scheme will be paid by the employer and will get the benefit of tax as deductible expenditure and the same will not be treated as perquisites in the hands of the employee.
3. Group Gratuity Scheme
A Trust Fund is created under Group Gratuity Scheme. The gratuity liability is funded by introducing a Group Gratuity Scheme with insurers. The employer will have to pay premium and investment of these contribution. The insurer will be making the payments to the employees as and when the various contingencies of payment arise.