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What Is Group Insurance And How Does It Work

Group Insurance Policy


Group insurance is a type of insurance plan that covers a number of people in the same contract. Such a plan provides the same level of insurance coverage to all members of a group irrespective of their age, gender, occupation or socio-economic status. Group insurance eliminates the need to buy a separate insurance plan for each member. Often, employers cover their employees with a group insurance plan as part of the payout benefits. Such a plan provides cover to group members and their spouses, children and dependent parents.

Need for Group Insurance

Types of Groups

A group insurance plan provides cover to the below types of groups.

  • Formal group: In a formal group, also known as employer-employee group, all members work for the same employer or group owner. A company, business organization and professional organization are examples of a formal group. The insurance plan is purchased by the employer.
  • Informal group: The members of an informal group may belong to a society or cultural association. They may hold the same credit card or account. In such a group, the group owner or administrator purchases the policy on behalf of the group members.

Features of Group Insurance

Here are some of the key features of group insurance.

  • As risk spreads over a large number of people, a group insurance plan provides standardized coverage at competitive premium rates. This means that the coverage is the same for all members of a group.
  • Irrespective of the size of the group, group insurance covers all members under the same plan. The plan may be in the form of group life insurance, group health insurance, group travel insurance or group personal accident insurance.
  • A group can comprise employer and employees or non-employer and employees such as holders of a credit card or members of a social or cultural association.
  • The manager of the group gets a master policy in the name of the group.
  • Premium is charged to the members or can be paid by the group.
  • A member is covered as long as he is a part of the group. The cover ceases if a member leaves the group.

Group insurance plans by Canara HSBC Life Insurance are a smart choice for employers and associations operating in different sectors. These plans secure financial needs of group members and help employers meet their employee benefit payouts in an effective manner.

Benefits of Group Insurance

Buying a group insurance plan can be rewarding for individual group members such as employees as well as employers. Today, many companies and businesses prefer to cover their employees with group insurance as part of the overall compensation. Here are the key advantages of a group insurance plan for employers and employees.

  • The premium paid in group insurance is lower than the premium in an individual policy for a member. These plans reduce the liability of the insurance provider as the risk is spread across all members of the group.
  • As premiums are often paid by the employer, group insurance offers a convenient way to cover all employees with different income brackets. These plans provide a cost-effective means for employers to provide an insurance cover for their employees.
  • Group insurance helps enhance loyalty of employees for the employer. A group member feels valued to be a part of the group and is likely to continue his association with the group for a long period. In addition, these plans help employers create an employee-friendly workplace and positive work environment.
  • Often, a group insurance plan covers family members of group members. For example, many group health insurance plans cover spouses, dependent children and parents of the group member.
  • Group members can claim tax benefits on the premium paid on group insurance while filing their income tax returns. Employers can also claim tax benefits for paying premiums on insurance plans for their employees.
  • Group insurance provides standardised coverage for all members. It helps people of lower income groups to get the same coverage as those with higher income groups.
  • Some group insurance plans can be converted into individual plans when a member leaves a group. In such a case, the member has to pay a conversion fee.
  • Group members are not required to fulfil pre-requisite conditions. On the other hand, individual insurance plans often require the policy applicant to undergo a health check-up.
  • Must Read - Group Term Life Insurance

Eligibility criteria

Here are the eligibility requirements for a group insurance plan.

  • The minimum number of group members can vary in different types of group insurance plans. Some plans may require a group strength of at least 10 members. Others may require 50 members in a group to be eligible for group insurance.
  • The minimum age for entry is 18 years.
  • The maximum age may vary. Some plans have a maximum age limit of 60 years while some allow entry till 80 years.
  • All members must be active and full-time members of the group.

Conclusion: Group insurance offers a smart and convenient option to cover all members of a group under the same plan. Such a plan offers several benefits to individual members as well as the group as a whole.

The Group Advantage Term Plan by Canara HSBC Life Insurance is a non-linked one-year term plan for non-employer employee groups. This plan provides life cover to group members and secures their family against uncertainties of life. In this plan, you can opt for a fixed sum assured or a linearly reducing one. It also provides flexibility to modify the benefit and coverage.

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