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Pro and Cons of Group Insurance

Find out about the advantages and drawbacks of group life insurance.

The Advantage and Drawbacks of Group Insurance

Group insurance helps take care of employees. It provides financial security for them, which may lead to higher productivity levels and satisfaction. However, group insurance also has its own drawbacks that should be considered when you purchase a policy.

Below, we’re going to look at the pros and cons of group insurance that you should know about to make the right choice.

Key Points

  • Group insurance helps take care of employees, but it also has its drwabacks.
  • Group insurance can increase employee retention and satisfaction. It is also convenient, customisable, and affordable.
  • The downside of group term life insurance is that the scheme is controlled by the employer, which means employees have limited choice.

Pros of Having Group Insurance

Investing in a group insurance policy obviously comes with many benefits. Here are some of them:

Pros: Convenience

Since there is not much paperwork to fill out, most group life insurance policies are straightforward to sign up for. If you are an employer, you can get all members of your company secured under one single policy, so you don’t have to worry about maintaining multiple insurance plans for every employee. This means that the renewal process is also seamless since different types of insurance are processed as a single policy.

If you are an employee, getting coverage from your place of employment can be relatively easy. HR offices are normally on hand to answer questions about the paperwork, which is also included with the hiring documents.

When it comes to group life insurance policies, your options as an employee are usually limited, so make sure you’re well aware of your insurance needs before deciding to go with group life insurance.

Pros: Customisable

Group insurance can be tailored to you and your company unique needs. As an employer, you can choose the type of insurance you want to have and include many additional coverages to further protect your employees and your business. You can also offer the options for your employees to include their families within the policy.

Pros: Increase Employee Retention and Satisfaction

Having a group insurance policy can help companies to attract and retain their employees, which in turn will improve the business’ brand image.

In addition, since a comprehensive group insurance policy safeguard employees against unfortunate events, it will show that the company care about their employees’ needs. When employees feel appreciated by their companies, their overall satisfaction will increase.

Pros: Cost Savings

Group insurance covers a large number of people. Thus it reduces the risk factor, so employers can get cost-effective premium rates. The premium paid for a group insurance policy may also help employers avail of tax benefits. This means that companies can save a significant amount of money by participating in a group insurance policy.

Having a group insurance policy can help companies to attract and retain their employees.

Cons of Having Group Insurance

The advantages of group insurance are attractive. However, you should also consider the following drawbacks before you purchase group insurance.

Cons: Choice of Plan and Insurer Is Made By the Employer

Although group insurance is highly customisable, the employer chooses the type of plan and the insurer they want to work with. In other words, employees have a limited choice because the policy is controlled by the employer. As an employee, you will not find the range of policy options you might find outside of work. Therefore, you should consult a financial advisor if you want to have more comprehensive insurance.

Cons: Coverage Ends When Employee Leave Their Job

As an employee, the coverage of group life insurance is tied to your job. If you leave your job, you may not be able to take the policy with you. In some cases, you may be able to convert your group insurance to individual insurance. However, the premium cost may go up substantially.

Cons: Low Coverage Amounts

Coverage amounts of group insurance vary and are usually low, so you may not be able to purchase as much insurance as you need. If you need more insurance, you should consider taking an individual insurance policy rather than relying on your company’s group insurance.