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Why is a group insurance policy so vital in a world of full of uncertainties?

Why is a group insurance policy so vital in a world of full of uncertainties?

Published by Programme B

The backbone of any business is its set of employees. To ensure high-quality work, hiring talented professionals is not enough. You have to cater to their needs so that they are happy with how the company looks after them. When you have satisfied and pleased employees, you can rest assured about their loyalty. 

Have you ever wondered what factors influence the satisfaction level of employees? In addition to career growth, recognition, and job security, employees also look forward to financial security. With a group life insurance policy, you offer protection to your employees and family members from uncertainties in life.

The life insurance industry in Canada is a trillion-dollar industry, and it is growing by leaps and bounds. Twenty-two million Canadians have life insurance coverage, out of which 62% of Canadians have group life insurance offered by the employees. 

However, group life insurance alone often isn’t enough for most Canadians and their families. In this article, we will walk you through how group life insurance works and how you can make the most of your coverage.

  • What is a life insurance policy?

The life insurance policy helps protect the employee’s family against financial problems in case of the untimely death of the employee. The policyholder (in this case, you) decides on the nominee who would receive the financial payout in case of untimely death. The nominee can use the amount received to clear off their mortgage, existing debts or the child’s education cost. 

You can enjoy life insurance coverage in two ways:

  1. Your employer provides you with an insurance policy, which is a part of the group benefits policy. The group insurance policy is offered as term insurance. It means the insurance policy is valid as long as you are employed. Once you leave the organization, the policy becomes null and void. Group life insurance may also not provide enough coverage to fit your loved ones’ needs alone, so it’s a good idea to look into other life insurance policies to fully round out your coverage. 
  2. You can purchase the policy as an individual life insurance policy. You can pay the insurance premium monthly, quarterly, or annually. In return, your loved ones will receive a tax-free payout if you pass away during your policy’s coverage period, which they can use to assist with final expenses, your children’s education, or even to help pay off the remaining mortgage.

In many cases, it’s a good idea to have both group life insurance and a separate term life insurance policy in place. This gives you the option to top-up your group life insurance policy, making your coverage amount customizable to suit your needs.

  • What is a group life insurance policy?

This policy is very similar to the other existing individual insurance policies where you will pay the premium. In return, the nominee will get the financial benefit in case of your death. 

However, in the case of the group insurance policy, it is your employer (and not you) who pays the insurance premium. The employer may not deduct the monthly premium from your salary. But, here, too, your nominee will get the insurance amount in case of your untimely death. 

Note: In addition to the low cost, another significant benefit of a group life insurance policy is that there is no need to provide any medical evidence or blood test for the employee to avail of this insurance policy. 

  • What are the different types of group life insurance?

There are two different types of group life insurance policies:

  1. Employee basic life – it is the most common type of insurance coverage where the employee’s beneficiary will get the money in case they pass away. This coverage comes with two options: flat coverage amount or based on the employee’s salary.
  2. Dependent basic life – in this coverage, if any of the employee’s dependents has an untimely death, the employee will receive the benefit. It is generally a flat amount and sometimes covers funeral expenses. 
  • Financial payout upon death – what do you need to know?

In the unfortunate event of the employee’s untimely death, the nominee will get the money. The amount paid will depend on either the employee’s salary or it will be a flat amount. The employer generally decides the option. At times, they often mix and match by selecting different coverage amounts for different grades of employees. 

For example, Managers will receive 2x of their salary while the non-management employees will get a flat amount. 

  • Are any taxes applicable to group life insurance policies?

If the employer pays the premium, it amounts to a taxable benefit for the employee. And if the employee pays the premium, it amounts to a non-taxable benefit for the employee. 

Note: Irrespective of who pays the premium, the death benefit is always tax-free.

  • What are the things to consider when you opt for group life insurance coverage?

Following are some essential factors, which you cannot overlook in the case of group life insurance coverage:

  • Employment termination – Since this policy is available only for employees who leave the company, lose their job, or retire, they will not get the coverage anymore. However, the employee can convert this policy into an individual insurance policy at the time of job change within 31 days of leaving the job.
  • Coverage reduction – the coverage amount generally reduces by the time the employee turns 65 and gets terminated as they turn 70.
  • Additional Life Coverage – it is important to remember that the group insurance policy is often insufficient to meet the nominee’s financial requirements after the employee’s death. Investing in an individual insurance policy along with group policy is a wise decision. This will help to reduce the financial risk to a great extent.


To sum it up

Investing in a group insurance policy is the need of the hour. The group insurance policy offers protection against unforeseen circumstances and mitigates the risk for all the employees in an organization. While many purchase this insurance policy, most are unaware of the benefits offered or the applicable terms and conditions. It is essential to update yourself about the same. Remember that when you change company, you can always convert the group insurance policy to an individual one. If required, do so.

You must get in touch with a good insurance company as far as a group insurance policy is concerned. Discuss all the pros and cons and collect all the necessary details. If you have any queries, discuss them with the experts. These professionals have all the required information. They will guide you accordingly. 

Photo by alleksana –