Understanding Group Term Life Insurance
In Malaysia, group term life insurance is commonly offered as part of employee benefits.
Life insurance provides financial protection for your loved ones in the unfortunate event of your passing. One such type of life insurance is group term life insurance. In this article, we will explore the features, types, advantages, and disadvantages of group-term life insurance.
Features of Group Term Life Insurance
Group term life insurance provides coverage to a group of people in an organisation. The coverage amount or sum assured varies depending on the employer and insurance provider but generally ranges from 36, 48, 72 or 84 times the employee’s monthly salary. Group term life insurance provides coverage in the event of the insured’s death, but does not provide any maturity benefits. At AmMetLife, Group Term Life Insurance Scheme covers death, total & permanent disability, as well as an optional Rider for critical illnesses (39 types). The premiums and payment options are determined by the employer, but group members typically pay very little or anything at all. Eligibility for group term life insurance varies depending on the employer, but it is generally available to full-time employees.
The employer-sponsored group term life insurance is the most common type of group term life insurance. The popularity of employer-sponsored group term life insurance can be attributed to several factors. Firstly, it provides employees with a basic level of financial protection. Secondly, it is an affordable way for employers to provide a valuable benefit to their employees. Thirdly, it is a simple and easy way to manage insurance coverage for a large group of people.
Advantages and Disadvantages of Group Term Life Insurance
Advantages
i) Low premium
One of the biggest advantages is that it is cost-effective. Employees offer group term life insurance as part of their benefits package, thus, premiums are paid by the employer and the coverage fee is low or free for the employee. It is an accessible option for individuals who cannot afford an individual policy.
ii) Accessible for employees with pre-existing medical conditions
Group term life insurance is convenient and less time-consuming to enrol in as it doesn't require medical examinations. This means that employees with pre-existing medical conditions are able to obtain coverage through this plan.
The benefits of AmMetLife's Group Term Life Insurance Scheme is its flexible nature that allows you to select the coverage that you need. The premium varies depending on whether you chose coverage for repatriation, terminal illness, funeral expenses, accidental death and disablement as well as permanent partial disability. Overall, the affordability, convenience, and accessibility of group term life insurance make it a popular choice.
Disadvantages
One of the main disadvantages of group term life insurance is that the coverage is typically limited and may not be sufficient for everyone’s needs. The coverage available is based on things like tenure, base salary, and employment status such as full-time, associate, or executive. Besides that, the coverage is only limited to the period of employment. Thus, if an individual leaves their job, they lose their coverage, and looking for new coverage can be more expensive due to age and health changes. Moreover, group term life insurance may not be suitable for individuals with medical conditions that require expensive treatment as group term life insurance has limited coverage. Due to these disadvantages, group term life insurance is sometimes advised as supplementary insurance.
Benefits for employers
Offering group term life insurance as an employee benefit not only boosts morale and loyalty but is also a powerful recruiting tool. Employees are more likely to join and remain with a company that offers comprehensive benefits. It can also help businesses attract and retain top talent. Besides that, employers can demonstrate their commitment to the well-being of their employees and their families. Additionally, premiums paid by the employer may qualify for tax relief that is subject to the final decision of the Malaysian Inland Revenue Board. Lastly, offering group term life insurance can help businesses separate themselves from competitors as not all employers offer this type of benefit.
Conclusion
It is important to consider the different types of life insurance policies available and to determine if the coverage of group term life insurance is sufficient for your needs. If you are the sole breadwinner of your family, consider additional life insurance plans such as investing in an endowment insurance policy, whole life insurance, and investment-linked insurance. It is important to evaluate your needs and speak to a qualified insurance professional before investing in a financial protection insurance plan that is right for you. Our consultants at AmMetLife are here to guide you on life insurance plans and financial security.
