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Group Insurance Schemes

Group Insurance Schemes


1. Meaning

• Insurance which is issued to a group, such as an employer, credit union, or trade


association, and which provides coverage for individuals and sometimes their
dependents.

• Group Insurance Scheme is life insurance protection to groups of people. This scheme is
ideal for employers, associations, societies etc. and allows you to enjoy group benefits at
really low costs.

2. Schemes offered by LIC

 Group Insurance Schemes

 GROUP LIC'S SUPERANNUATION PLUS

LIC’s SUPERANNUATION PLUS PLAN, is a unit linked defined contribution plan for
management of Superannuation Funds. This plan is different from the traditional Cash
Accumulation Plan as the returns under the Plan are linked to the performance of the chosen
fund. SUPERANNUATION PLUS PLAN is suitable for companies with employees desiring to
have flexibility of choice of investment.

• Advantages of the LIC’s GROUP SUPERANNUATION PLUS PLAN:

1. Choice of 4 funds to meet various risk appetites.


2. Flexibility of building the fund subject to acceptable level of risk.
3. Facility of Switching between various funds. Four switches every year are free of cost.
4. There is no bid offer spread under this scheme.

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Group Insurance Schemes

5. Scheme can be surrendered at any time after the date of payment of first contribution.
The benefit on surrender will be subject to appropriate charges.
6. Maintenance of individual member-wise account and hassle Free Administration of
Scheme.
7. Assistance for execution of legal documents and installation of scheme

• Features

1. The Master Policyholder has the choice to invest the contributions in respect of
individual member in any one of the following four funds:

Fund Type Investment in Short-term Investment in Details and


Government / Investment Listed Equity objectives
Government such as money Share of the fund for
Guaranteed market risk/return
Securities/Corporate instruments
debt
Bond Fund Not less than 70% Not more than Nil Low risk
30%
Income Not less than 60% Not more than Not less than Steady Income—
Fund 30% 10% & Not Lower to Medium
more than 40% risk
Balanced Not less than 50% Not more than Not less than Balance Income
Fund 30% 20% & and
Not more than growth— Medium
50% risk
Growth Not less than 40% Not more than Not less than Long term Capital
Fund 30% 30% & growth— High
Not more than risk
60%

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Group Insurance Schemes

Note: The various funds offered are the names of the funds and do not in any way indicate the
quality of these plans, their future prospects and returns.

1. The allocation charge shall be 0.5% in the first year and nil in the subsequent years.
2. Other charges: Administrative charges, Fund management charges, switching charges,
surrender charges and service tax.
3. The Policyholder has the choice of investing the Member wise allocated contributions in
any one of the four fund types. Individual member-wise fund will be maintained. Any top
up of the contributions in respect of the members can be made at any time during the
membership period.
4. The Net Asset Value (NAV) of each fund will be computed daily.

• Special Features

1. Flexibility of Contributions: Policyholder may choose to pay contributions at any time


during the policy year.
2. Top-Up (Additional Contribution): The policyholder can pay top-up of the contribution
in respect of members at any time during the membership period.

• Benefits Under The Scheme

1. The amount available in respect of the member shall be the value of units in the
member’s fund. A portion of the amount can be commuted if the scheme rules allow. The
balance amount will be utilized to purchase immediate annuity, in respect of the
member/beneficiary certified by Policyholder, at the then prevailing annuity rates. Both
the commuted value and the annuity in respect of the member/beneficiary will be paid to
policyholder. However the same can also be paid to the beneficiary directly with the
consent of the policyholder. On exit of a member the amount available shall be the value
of units. The value of units in respect of the member shall be the number of units held
under the chosen fund type multiplied by the corresponding NAV.

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2. The policy can be surrendered at any time after the date of payment of first contribution.
The benefit available on surrender of the policy shall be the total of value of units in
respect of all Members taken together less appropriate surrender charge.

At all times the Policyholder’s unit account should be sufficient to cover the relevant charges and
benefits payable at such point of time, subject to a minimum balance of Rs. Five lacs in the
Policyholder’s Unit Account. In case the Policyholder’s Unit Account falls below this limit, the
policy shall compulsorily be terminated and the balance amount in the policy holder’s Unit
Account will be refunded to the policy holder.

• Tax Benefits

The provisions relating to the approved Superannuation Scheme are set out in Part 'B' of
the Fourth Scheme of the Income-Tax Act, 1961 and Part XIII of the Income Tax Rules,
1962. The income tax concession will be available only if the scheme is approved by the
CIT.

1. The annual contribution is treated as a deductible business expense in term of Section


36(1) (iv) of the I.T. Act.
2. In terms of a Notification issued by the Central Board of Direct Taxes .80% of the
contribution (s) towards the past service liability are treated as deductible business
expenses spread over in the subsequent years of payment.
3. The employee's contribution, in the case of the Contributions scheme qualifies for
exemption under Section 80C of the Income-Tax Act.

• Risks Borne By The Individual Member

The Value of the units is subject to market and other risks and there can be no assurance that the
objectives of any of the above funds will be achieved. The value of units within each Fund can
go up or down depending on the different factors affecting the capital markets and may also be
affected by changes in the general level of interest rates and other economic factors. All benefits

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under the policy are also subject to the Tax Laws and other Financial enactments as they exist
from time to time.

 Group (Term) Insurance Scheme

A) Nature of the Scheme

Group (term) Insurance Scheme is meant to provide life insurance protection to groups of
people. Administration of the scheme is on group basis and cost is low. Under Group (Term)
Insurance Scheme, life insurance cover is allowed to all the members of a group subject to some
simple insurability conditions without insisting upon any medical evidence. Scheme offers
covers only on death and there is no maturity value at the end of the term.

B) Premium Chargeable:

Group (Term) Insurance Scheme is at present offered under One Year Renewable Group term
assurance plan (OYRGTA). Every year on Annual Renewal date LIC charges the premium
depending upon the changes in size and age distribution of the age group.

C) Different Schemes:

Group (term) Insurance Scheme has a number of varieties. The Scheme may provide for a
uniform cover to all members of the group or graded covers for different categories of members,
cover for all amounts of outstanding housing loans or vehicle advances, or some other benefits
(e.g., life cover to supplement pension or PF benefits in case of death). The schemes may have
add-ons like Double Accident Benefit, Critical Illness Benefit, Disability benefit etc.

D) General Features of various Group Insurance Schemes:


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Group Insurance Schemes

1. PREMIUM:
The premium under such scheme may be wholly paid by the employer or the Nodal
Agency. However, the scheme may be contributory i.e. the members may also contribute.

2. DOUBLE ACCIDENT BENEFIT:


Double Accident Benefit, i.e. payment of double the sum assured on death due to
accident (without permanent disability benefit), may be allowed under Group Insurance
Schemes for an extra premium.

3. ELIGIBILITY:
For Group Insurance Scheme in lieu of EDLIS the insurability condition is that should be
a member of the Provident Fund Scheme of the employer. For other GI Schemes of
employer-employee groups the insurability condition is that the member should not be
absent on ground of sickness on the entry date. For all non-employer-employee Group
Schemes the basic insurability condition is that the member should be in good health on
the date of entry.

4. ADMINISTRATION OF THE SCHEME:


At the commencement and thereafter on each Annual Renewal Date, the Group
Policyholder will have to send all the member's data (and particulars of the new entrants
from time to time) to the P & GS unit of LIC. Detailed OYRGTA premium calculation
will be made on each Annual Renewal Date.

When a claim arises, the particulars of the respective member are to be intimated together with
the claim form and death certificate.

 Group Insurance Scheme in Lieu Of EDLI

• What is EDLI?

All employees to whom the Employee's Provident Fund and Miscellaneous Provision Act
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Group Insurance Schemes

, 1952 applies, have a Statutory liability to subscribe to Employee's Deposit Linked


Insurance Scheme, 1976 to provide for the benefit of Life insurance to all their
employees. Under the scheme as amended with effect from 24th June, 2000 the insurance
benefit is equal to the average balance to the credit of the deceased employee in the
Provident Fund during the last 12 months, provided that where such balance exceeds
Rs.35, 000, insurance cover would be equal to Rs.35, 000 plus 25% of the amount in
excess of Rs.35, 000 subject to a maximum of Rs.60, 000. Thus if the length of service is
not adequate and/ or the salary is low the average balance may be substantially less and
such the benefit to the employee's family is either inadequate or non-existent.

The contribution @ 0.50% of each employee's salary is payable by the Employer to the
Provident Fund Authorities.

• The Better Alternative

However, under Sec. 17(2A) of the act, the employer may be exempted from
contributing to this scheme, if he/she has provided for better insurance benefits through
alternative scheme. LIC's Group Insurance Scheme in lieu of EDLI has been accepted as
one such better alternative.
• Advantages To The Employer :

1. The premium payable by the employer is usually less than the total contribution being
paid by the employer to R.P.F.C; particularly when the salary level is high and average
age of the group is low.
2. Settlement of claim is quicker; LIC requires only the death certificate and the Claim
Form from the employer.

3. Premium paid by the employer is treated as normal business expenses for Income-Tax
purpose.

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• Advantages To The Employee:


Each employee is covered for a sum assured ranging between 5,000 to 2, 00,000
depending upon the current salary and service put in from day one irrespective of the
actual balance in the Provident Fund. Alternatively every employee/ worker can be
covered for a uniform sum assured which will be decided depending upon the group size.

• Accident Benefit:
Double accident benefit can be allowed to the extent of the Sum Assured for an extra
Premium.

• Steps To Introduce The Scheme


1. Put up notice for the knowledge of the employees that you are going in for LIC's Scheme
in lieu of EDLI.

2. Apply to the Regional Provident Fund Commissioner under Sec.17 (2A) of the E.P.F. and
M.P. Act 1952 to exempt you from EDLI Scheme. The application should be
accompanied by the prescribed requirements including the Rules of the Proposed Group
Insurance scheme. Central PF Commissioner has authorized the R.P.F.C. to grant
exemption from the 1st of the month in which the application for relaxation is submitted.
LIC also offers necessary guidance to the employers for seeking relaxation.

 GROUP GRATUITY SCHEME

LIC brings you LIC’s GRATUITY PLUS PLAN, a unit linked plan for management of Gratuity
Funds. This plan is different from the traditional Cash Accumulation Plan as the returns under
the Plan are linked to the performance of the chosen fund. GRATUITY PLUS PLAN is suitable
for companies who desire to entrust Gratuity Fund management to an insurer and wish to have
the flexibility of choice of investments.

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Group Insurance Schemes

• Advantages Of The LIC’S GROUP GRATUITY PLUS PLAN

1. Choice of 4 funds to meet various risk appetites.


2. Flexibility in structuring the Gratuity Costs based on performance of Fund.
3. Facility of Switching between various funds. One switch every year is free of cost.
4. It provides for life insurance cover at a very minimal cost. Cover can be equal to the
gratuity payable for anticipated service. Alternatively, the company can also choose for
each member a uniform level of cover equal to a minimum of one months salary or more.
5. There is no bid offer spread under this scheme.
6. Scheme can be surrendered at any time. There is no surrender penalty imposed.
7. Hassle Free Administration of Scheme
8. Assistance for execution of legal documents and installation of scheme.

• Features

1. The Master Policyholder has the choice to invest the contributions in respect of
individual member in any one of the following four funds:

Fund Type Corporate Short-term Investment in Risk Profile


Investment in Investment Listed Equity
Government / such as money Share
Government market
Guaranteed Instruments

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Securities/Corporate
debt ( Rated AA and
above )
Bond Fund Not less than 80% 100 % Nil Low risk
Income Not less than 70% Not more than Not more than Low to Medium
Fund 90% 20% risk
Balanced Not less than 60% Not more than Not more than Medium risk
Fund 80% 30%

Growth Not less than 50% Not more than Not more than Medium to High
Fund 70% 40% risk

Note: The various funds offered are the names of the funds and do not in any way
indicate the quality of these plans, their future prospects and returns.

2. The allocation charge shall be as follows :

Size of the Contribution Allocation Rate


(Rs.) 1st Year 2nd Year 3rd Year 4th Year
onwards
Less than or equal to Rs.1.50 97% 98% 99% 100%
Crores
Above Rs.1.50 Crores to Rs. 98% 99% 99% 100%
10 Crores
Above Rs.10 crores and 98.5% 99% 99% 100%
more

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3. Other charges: Mortality charges, Administrative charges, Fund management charges,


switching charges, surrender charges and service tax.
4. The Net Asset Value (NAV) of each fund will be computed daily.

• Special Features

1. Auto Cover: If the contributions are not received on the policy anniversary the policy
becomes paid up. However the term Assurance Cover will be provided to the members
by way of Auto Cover for a period of five years from the policy anniversary for which
the contributions have not been received from the policyholder. The Term Assurance
cover equal to Future Service Gratuity or number of month’s salary subject to a minimum
of one month salary of members as opted by the policyholder will be provided as Auto
Cover for which the mortality charges together with service tax if any will be deducted
by cancelling appropriate number of units from the Unit Account. At the end of five years
from the policy anniversary for which the contributions have not been received from the
policyholder if the policy is still in paid up condition the policy shall be compulsorily
terminated.
2. Contributions: Contributions are payable on every policy anniversary.

• Benefits Under The Scheme

1. Gratuity Benefits to Members whenever payable as per Rules of the Scheme shall be paid
to the Policyholder by debiting the requisite no of units to the Policyholder’s Unit
Account at NAV applicable at that time.
2. In case of death of member, life insurance cover as opted for by Policyholder will also be
paid by the Corporation.
3. The policy can be surrendered at any time. The benefit available on surrender of the
policy will be the value of total number of units held in the Policyholder’s Unit Account
at the time of surrender.

At all times the Policyholder’s unit account should be sufficient to cover the relevant charges
and benefits payable at such point of time, subject to a minimum balance of Rs. Five lacs in the

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Group Insurance Schemes

Policyholder’s Unit Account. In case the Policyholder’s Unit Account falls below this limit, the
policy shall compulsorily be terminated and the balance amount in the policy holder’s Unit
Account will be refunded to the policy holder.

• Tax Benefits:

The provisions relating to the approved Superannuation Scheme are set out in Part 'B' of
the Fourth Scheme of the Income-Tax Act, 1961 and Part XIII of the Income Tax Rules,
1962. The income tax concession will be available only if the scheme is approved by the
CIT.

1. The annual contribution is treated as a deductible business expense in term of Section


36(1) (iv) of the I.T. Act.
2. In terms of a Notification issued by the Central Board of Direct Taxes .80% of the
contribution (s) towards the past service liability are treated as deductible business
expenses spread over in the subsequent years of payment.
3. The employee's contribution, in the case of the Contributions scheme qualifies for
exemption under Section 80C of the Income-Tax Act.

• Risks Borne By The Individual Member

The Value of the units is subject to market and other risks and there can be no assurance that the
objectives of any of the above funds will be achieved. The value of units within each Fund can
go up or down depending on the different factors affecting the capital markets and may also be
affected by changes in the general level of interest rates and other economic factors. All benefits
under the policy are also subject to the Tax Laws and other Financial enactments as they exist
from time to time.

 GROUP SUPERANNUATION SCHEME

An organization today, has not only to man the various positions with competent and trained
personnel but also has to create an environment wherein they can give their best and derive a

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sense of well-being, a sense of fulfillment and security and take pride in their continued
association with the organization. Provision of pension may be an attraction for such persons to
continue in the organization and give their best to the organization, as with continuous
improvement in longevity a regular income even after retirement has become a necessity. To
provide the pension benefits to employees, an employer has two alternatives under the provisions
of Rule 89 of Income Tax Rules 1962.

1. Create a privately managed trust fund and as and when a member retires, purchase
annuity from LIC to provide pension for such retiring member.
2. Entrust the Management of the Pension Fund to an Insurer by purchasing its Group
Superannuation Scheme.

• Advantages Of The LIC Managed Pension Fund:

The LIC managed Pension fund has the following added and distinct advantages:-

1. An attractive and competitive yield on the fund will be credited to Fund A/c.

2. The problem of liquidity gets automatically eliminated as soon as the fund is managed by
LIC.

3. We conduct free actuarial valuations of the funds administered by us from time to time.

4. The Administration of the fund is carried out by us in a scientific manner and claims are
promptly settled.

5. Group Insurance in conjunction with the Group Superannuation Scheme can be taken by
an Organization to provide for an attractive lump sum payment on the unfortunate death
of a member while in service, at very nominal cost.

• Superannuation Scheme Provided by LIC

The employer contributes a certain fixed percentage of salary of each member. Such
Contributions are accumulated by LIC and the accumulated amount is utilized to provide
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various benefits as mentioned below.

• Benefits:

1. ON RETIREMENT

On Retirement of a member, the corpus (contributions plus interest) is utilized to provide the
pension as per his choice.

2. ON DEATH

The Pension is payable on the life of the beneficiary. Corpus is utilized towards the payment
of pension of the type the beneficiary may opt and the benefit so received is tax free. A lump
sum payable by way of death besides the pension, if the employer has taken Group Insurance
Scheme in conjunction with the Group Superannuation Scheme.

3. ON WITHDRAWAL

He can get the equitable interest transferred to the Superannuation Scheme of the new
employer or opt for immediate or deferred pension.

• Pension Options Provided By LIC:

1. Life Pension ceasing at death.


2. Life Pension with Return of Capital and Group Pension Terminal Bonus on death.
3. Life Pension guaranteed for 5, 10, 15 or 20 years and life thereafter.
4. Joint Life Pension payable on the last survivor of the employee and spouse.
5. Joint Life Pension payable to the last survivor of the employee and spouse with return of
capital on the death of the last survivor. If desired, 1/3rd of the pension can be commuted
at vesting.

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• Eligibility Condition:

It is not obligatory or statutory on the part of the employer to provide for pension to all
employees. It is entirely up to him to decide to which class/ classes of employees he
desires to extend the scheme. The eligibility conditions may be defined on the basis of
designation or salary. (However, after the categories are specified, employer cannot
discriminate between the employees and thus extends the scheme uniformly).

• Contribution:

The maximum annual contribution that an employer can make to the Pension Fund and
Provident Fund is restricted by the Income Tax Provisions to 27% of the annual salary
(basic plus D.A.) The annual contributions are treated as deductible business expenses.

• Who Pays Contribution?

Mostly the employer contributes, but is so desired, both the employer and the employees
may contribute, in which case the scheme is called a Contributory Pension Fund Scheme.

• Tax Benefits:

The provisions relating to the approved Superannuation Scheme are set out in Part 'B' of
the Fourth Scheme of the Income-Tax Act, 1961 and Part XIII of the Income Tax Rules,
1962. The income tax concession will be available only if the scheme is approved by the
CIT.

1. The annual contribution is treated as a deductible business expense in term of Section


36(1) (iv) of the I.T. Act.

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Group Insurance Schemes

2. In terms of a Notification issued by the Central Board of Direct Taxes .80% of the
contribution (s) towards the past service liability are treated as deductible business
expenses spread over in the subsequent years of payment.
3. The employee's contribution, in the case of the Contributions scheme qualifies for
exemption under Section 80C of the Income-Tax Act.

• Group Insurance Scheme In Conjunction With Superannuation


Scheme:

The members of the Group Superannuation scheme can be covered under Group
Insurance in conjunction with superannuation scheme so as to provide death risk
cover while in service subject to certain conditions.

 GROUP SAVINGS LINKED INSURANCE SCHEME

The people working in the metropolitan cities, occupied as they are in their day to-day activities
where inflation is inevitable, find difficult to provide adequate security for their families,
Individual insurance with high premium in fact does not provide adequate insurance protection.
Their need for insurance protection during service coupled with adequate savings for carefree
retired life remains unfulfilled. Keeping this in mind, LIC has come out with an attractive
insurance scheme viz. Group Savings Linked Insurance scheme at a very low cost. Central
Government has a similar scheme with minor modifications. Semi-Government Organisations,
Public Sector Organisations and also Large private business houses and industrial enterprises
have introduced this scheme, the salient features of which are as under:

A. Objectives Of The Scheme:

• Protection at low cost without individual evidence of health.

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• Attractive returns on savings to meet post retirement needs.

• Simple procedures for granting life cover to large groups under one umbrella.

B. Introduction Of The Scheme:

a) The Scheme can be introduced by employers provided certain percentage of employees


is willing to join the Scheme.

b) For the new entrants to the Company, the membership of the Scheme is compulsory.

C. Premia:

• It is decided on the basis of Group size and the occupation of the group. Premium has
two components i.e. Risk Premium and Savings

• Premium. Risk Premium is utilized to offer life cover and the Savings Premium is
accumulated in members account.

D. Accident Benefit:

Double accident benefit can be allowed to the extent of the Sum Assured for an extra
Premium.

E. Interest On Savings:

The present rate of interest allowed on saving portion of premium is 8% compounding


yearly.

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Group Insurance Schemes

F. Eligibility To Join The Scheme:

Any employee irrespective of his present state of health is eligible to join the scheme
subject to certain conditions. The only insurability condition is that the employee should
not be absent on medical ground on the date of commencement of the scheme. All
employees who have not crossed the retirement age are eligible to join the scheme. All
future employees have to join the scheme compulsorily.

G. Tax Benefits:
Employees' total contribution, savings as well as risk premium is entitled for income-tax
rebate under Sec. 80C of the Income Tax Act. The entire claim amount including interest
earned payable on retirement or leaving service or on death is free from income-tax. The
premium paid by the employer towards insurance cover is treated as business expenses.

 GROUP LEAVE ENCASHMENT SCHEME

Many employers are providing Leave Encashment benefit in addition to other retirement
benefits to their employees which is a lumpsum amount payable to the employees or their
dependants on retirement, death, disablement, voluntary retirement etc.

• Funding of leave encashment:

End-of-the-year leave encashment facility available to employees, can be a huge


liability to the company. So can be Medical Leave Encashment, if provided for. To
meet this need of entrepreneurs and businesses, LIC has introduced Group Leave
Encashment Scheme. Just pay a yearly premium, fund your leave encashment liability
and let LIC take care of your worries.

• Nature Of Liability
The amount depends upon the leave to the credit of the employee and his/ her salary
at the time of exit. Liability is of increasing nature as it is linked with salary as well as

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leave position.

As per the amended section 209 (3) of the Company's Act 1956 and Accounting
Standard (AS-15) dated January, 1995, the employers have to account for the liability
in respect of leave encashment facility, if any, available to the employees and to
provide for the same in their Annual Accounts. It is, therefore, necessary for the
companies to ascertain liability in respect of Leave Encashment facilities, if any,
available to the employees and provide for the same in the books of accounts every
year. It helps the employers in ascertaining the true cost of their products and
services.

• The Features:
Group Leave Encashment Schemes (GLES) of LIC helps the employers in funding of
their lave encashment liability. The salient features of the scheme are as follows:-

1. The Company will submit the employees' data and rules for Leave Encashment. LIC will
make actuarial valuation and find out the funding requirements which shall be quoted to
the company. The company will contribute as per the advice of LIC.

2. A uniform life cover per employee or graded cover will be provided under One Year
Renewable Group Term Assurance Plan of LIC. A small term insurance premium will be
charged in addition to contributions for funding.

3. A Running Account will be maintained under the scheme and the contributions
(excluding term assurance premium) will be credited to this account and all claims except
term assurance cover will be settled out of the Running Account. Interest at the rate
declared by LIC from time to time will be credited to the Running Account at the end of
the financial year.

• Benefits:

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Group Insurance Schemes

1. On the exit of an employee or encashment of leaves during the service the Leave
Encashment amount will be paid from the Fund of the scheme maintained with LIC.

2. On the death of an employee, in addition to his / her leave encashment benefit, his/her
family will be entitled to the amount of Insurance Cover, which will be tax-free.

3. The Life Insurance Corporation of India will do the Actuarial Valuation and will provide
necessary certificate as per AS-15.

4. The amount of Term Insurance Premium paid for Life Insurance Cover will be treated as business
expenses.

 GROUP MORTGAGE REDEMPTION ASSURANCE


SCHEME

‘Group Mortgage Redemption Assurance Scheme’, is a Group Insurance Scheme for the
borrowers of Housing/Vehicle Loans from Financial Institutions where Loan is recovered under
EMI. Under the Scheme, the premium is payable in a single installment covering a decreasing
life cover. Insurance cover every year will be almost equal to the loan outstanding at the
anniversary date of each borrower.

Under the scheme, the premium depends upon:

1. Age (nearer Birthday) at entry of the member into the Scheme.

2. Outstanding loan amount at entry date.

3. Term of loan.

4. Schedule of repayment.

5. Rate of interest with which the loan was availed.

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Any borrower may become member of this scheme . The minimum term of assurance is 3
years. Existing Borrowers can join the scheme with certain conditions within 6 months of the
commencement of scheme.

In case of death of the member during the coverage period ,life cover on the anniversary date
preceding the date of death is payable .The claim proceeds are used to square off the
outstanding loan.

 GROUP CRITICAL ILLNESS RIDER

Critical Illness product (accelerated benefit) is basically offered as an optional Rider benefit to
all Employer-Employee group policyholders (both existing and new schemes) along with Group
term insurance schemes i.e. OYRGTA (One year renewal group term assurance) type schemes.
Schemes along with which the rider can be given shall include Group insurance, Group Gratuity
(CA), Group Leave Encashment and Group insurance in conjunction with Superannuation. The
Benefit will not be extended to spouses or dependants. Only full time permanent employees who
are actively at work will be eligible for Critical Illness cover. The relevant premium is to be paid
by the Group Policyholder.

• Features :

1. The Group critical illness rider benefit to employees is given as an add on benefit to the
Group policy which has an element of life cover.
2. The Group Critical Illness rider allowable for each member shall be a minimum of 20 %
of sum assured under the base plan and shall not exceed 100% of the sum assured under
the base plan subject to minimum of Rs. 50 Thousands and maximum of Rs 20 lac per
member.
3. All members of the attached policy should participate at inception and all eligible new
members should compulsorily participate.
4. The diseases covered under the rider (subject to certain exclusions) are :

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1. Cancer 2. Coronary Artery (Bye pass) Surgery 3. Heart attack (Myocardial


infarction) 4. Stroke 5.Kidney failure (End stage renal disease) 6. Aorta (Surgery of
Aorta) 7. Heart valve replacement 8.Major Burns.

• Benefits :

1. The Critical Illness Accelerated benefit is payable upon the first incidence of any of the 8
specified diseases and evidenced as per the diagnostic criteria specified. The rider shall
terminate on payment of the Critical Illness benefit.
2. The Group Critical illness (Accelerated) Benefit pays a lump sum amount as a percentage
of Sum assured out of the Sum assured under the life cover in the event of occurrence of
8 diseases covered under the rider.
3. No Critical Illness Benefit shall become payable to a member if the disease occurs within
90 days of the start of the coverage for that member of the scheme. This period of 90
days shall be called “Waiting period”.
4. In case of death nothing is payable under this rider. However, under the base plan (i.e.,
the scheme on which the rider is opted for) benefits as under shall become payable :

o A benefit equal to base sum assured if no critical illness benefit is payable or has been
paid earlier.
o If critical illness benefit is payable or already paid, the benefit is reduced by the
amount of critical illness benefit payable or already paid. In other words, the
difference between the base sum assured and the critical illness benefit already paid is
payable on death.

• Exclusions:

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1. Diseases in the presence of an HIV infection.


2. Diseases that have previously occurred in the life of the member of the scheme i.e. the
benefit is payable only if the disease is a first incidence , regardless of whether the earlier
incidence occurred before the individual was covered or whether the insured was covered
by us or another insurer.
3. Any disease occurring within 90 days of the start of the coverage for each member of the
scheme. (I.e. during the waiting period).
4. No payment will be made for any claim directly or indirectly caused by, based on, arising
out of, or howsoever, to any Critical Illness for which care, treatment, or advice was
recommended by or received from a Physician, or which first manifested itself or was
contracted before the start of the policy period, or for which claim has or could have been
made under any earlier policy.
5. Any congenital condition.
6. Alcohol or solvent abuse or taking of drugs, narcotics or psychotropic substances unless
taken in accordance with the lawful directions and prescription of a registered medical
practitioner.
7. Failure to seek or follow medical advice.
8. War, invasion, act of foreign enemy, hostilities(whether war be declared or not),armed or
unarmed truce, civil war ,mutiny, rebellion, revolution, insurrection, military or usurped
power, riot or civil commotion, strikes.
9. Taking part in any naval, military or air force operation during peace time.
10. Participation by the member of the scheme in any flying activity, except as a bona fide,
fare-paying passenger of a recognised airline on regular routes and on a scheduled
timetable.
11. Participation by the member of the scheme in a criminal or unlawful act.
12. Engaging or taking part in professional sport(s) or any hazardous pursuits, including but
not limited to , diving or riding or any kind of race, underwater activities involving the
use of breathing apparatus or not, hunting, mountaineering, parachuting , bungee-
jumping.

23
Group Insurance Schemes

13. Nuclear contamination, the radio active, explosive or hazardous nature of nuclear fuel
materials or property contaminated by nuclear fuel materials or accident arising from
such nature.
14. Intentional self inflicted injury, suicide or attempted suicide, while sane or insane.
15. Existing diseases are not covered.

Additional exclusions may be disease-specific and would be incorporated into the definition of
the disease.

• Tax Benefits :

1. All benefits under the policy are also subject to the Tax Laws and other financial
enactments as they exist from time to time.
2. The premium payable are exempted under section 80D of Income Tax act.

 GRATUITY PLUS

LIC’s GRATUITY PLUS PLAN , a unit linked plan for management of Gratuity Funds. This
plan is different from the traditional Cash Accumulation Plan as the returns under the Plan
24
Group Insurance Schemes

are linked to the performance of the chosen fund . GRATUITY PLUS PLAN is suitable for
companies who desire to entrust Gratuity Fund management to an insurer and wish to have
the flexibility of choice of investments.

• Why Is LIC’S GRATUITY PLUS PLAN The Best Choice?


o This scheme comes to you from the country’s leading insurer backed by more than 16
crore policyholders and an asset size around Rs 4, 50,000 crores.
o Choice of 4 funds to meet various risk appetites.
o Flexibility in structuring the Gratuity Costs based on performance of Fund.
o Facility of Switching between various funds. One switch every year is free of cost.
o It provides for life insurance cover at a very minimal cost. Cover can be equal to the
gratuity payable for anticipated service. Alternatively, the company can also choose for
each member a uniform level of cover equal to a minimum of one months’ salary or
more.
o There is no bid offer spread under this scheme.
o Scheme can be surrendered at any time. There is no surrender penalty imposed.
o Hassle Free Administration of Scheme
o Assistance for execution of legal documents and installation of scheme.

• Salient Features :

25
Group Insurance Schemes

The Company will have the choice to invest in any one of the following funds

Fund Type Corporate Short-term Investment in Risk Profile


Investment in investment Listed Equity
Government / such as money Shares
(1) Government market (4)
Guaranteed instruments
Securities/Corporate including CP
debt rated AA and rates PE & above
above and debt and
instruments that short term deposits
possess the with
certificate rated the Scheduled
AA+ commercial banks,
and above. Govt.
(2) Securities.)Inclusiv
e of (2)
( 3)
Bond Fund Not less than 80% 100% Nil Low

Income Fund Not less than 70% Not more than 90% Not more than Low to
20% Medium

Balanced Fund Not less than 60% Not more than 80% Not more than Medium
30%
Growth Fund Not less than 50% Not more than 70% Not more than Medium to
40% High

Note :The various funds offered are the names of the funds and do not in any way indicate the
quality of these plans , their future prospects and returns

26
Group Insurance Schemes

Contributions will be allotted to the Fund at the following rate and will depend on the size and
year of the contribution and will be as under:

Size of the Contribution (Rs.) Allocation Rate


1st year 2nd year 3rd year 4 thY e a r
Onwards
Less than or equal to Rs.1.50 97% 98%. 99% 100%
Crores
Above Rs.1.50 Crores to Rs. 10 98% 99% 99% 100%
Crores
Above Rs.10 crores and more 98.5% 99% 99% 100%

After deduction of the applicable charges, the balance amount will be applied to purchase units
of the Fund type chosen. The Net Asset Value (NAV) of each fund will be computed daily. The
Corporation shall arrange to inform the Policyholder the number of units and the value of the
Unit Account at least once in a year or at any time on request. At any time , the value of the
Policyholder Unit account shall be the number of units in the account multiplied by the NAV of
the Units on the date of calculation. The Policyholder’s Unit Account will be subject to
deduction of charges as specified herein.

• Charges under the Plan:


i) Premium Allocation Charge
This is a percentage of the contribution appropriated towards charges from the contribution
received. This charge will depend on the size and year of the contribution and will be as under :

Size of the Contribution (Rs.) Allocation Charges


27
Group Insurance Schemes

1st 2nd year 3rd 4thYear


Year year Onwards
Less than or equal to Rs.1.50 Crores 3% 2% 1% Nil
Above Rs.1.50 Crores to Rs. 10 2% 1% 1% Nil
Crores
Above Rs.10 crores and more 1.5% 1% 1% Nil

ii) Fund Management Charge


This is a charge levied as a percentage of the value of Assets and shall be appropriated by
adjusting the Net Asset Value. These are dependent on the selected type of fund and shall be
charged at the time of calculation of NAV. The fund management charge per annum for different
funds is given below:

Growth Fund Balanced Fund Income Fund Bond fund

0.80% 0.75% 0.70% 0.65%

iii) Policy Administration Charge


This charge shall represent the expenses other than those covered by Premium Allocation
Charges and the Fund Management Charge. In the first year an amount of Re 0.20 per thousand
Term Assurance Cover granted to members will be charged. From the second year onwards, a
fixed administrative charge of Rs.10/- per member subject to a minimum of Rs.2000/- and a
maximum of Rs.10000/- will be charged to the Policyholder Unit Account by canceling
appropriate number of units ,at the beginning of the policy anniversary every year . In addition,
an amount of Re 0.20 per thousand for the incremental Term Assurance Cover if any over the
cover granted in the previous year will be charged by canceling appropriate number of units out
of the Policyholder’s Unit Account at the NAV applicable at the time.

Note: Incremental Term Assurance Cover is the difference between Total Term Assurance cover
as on the current policy anniversary and the previous policy anniversary.

iv) Surrender Charge

28
Group Insurance Schemes

This is a charge levied on the Unit Fund at the time of Surrender of the Contract. However, there
is no Surrender Charge under this Policy .

v) Switching Charges
This charge is levied on switching of monies from one fund to another as described above. The
Policyholder can switch between any of the fund types , at any time provided contributions are
being received regularly under the policy. In a given policy year, the policyholder can make one
switch free of charge. Subsequent switches in that policy year shall be subject to a switching
charge of 0.1% of Policyholders Unit account subject to a minimum of Rs.1000 per switch and
maximum of Rs.50000 per switch.

vi) Mortality Charge


This is the cost of life insurance cover to be granted to the members .Mortality charges shall be
charged based on the age of each member and the Term Assurance Sum Assured Granted on the
commencement of the policy and on every policy anniversary.
Term Assurance Sum assured shall be the Future Service Gratuity or number of months salary
subject to a minimum of one month salary of members as desired by the Policyholder.

vi) Charges to cover Service Tax


Service tax is payable to the Government of India and shall be charged on the Mortality
charge.

vii) Bid/Offer Spread


Nil.

All the charges except Premium allocation charge and Mortality charge are reviewable with prior
approval of IRDA and they will be subject to the following maximum limit :-
- Policy Administration Charge - Rs 50/- per member subject to a minimum of Rs 5000/-
and a maximum of Rs 25000/-.
- Fund Management Charge -The Maximum for each Fund will be as follows:
i. Bond Fund 2.0% p.a of Unit Fund
29
Group Insurance Schemes

ii. Income Fund 2.0% p.a of Unit Fund


iii. Balanced Fund 2.5% p.a of Unit Fund
iv. Growth Fund 3.0% p.a of Unit Fund

- Service Tax Charge - Service Tax Charge will be Fixed depending upon the Rates fixed by the
Government from time to time.
- Switching Charges - 0.5% of value of Policyholders Unit account.

• Special Features

1. AUTO COVER: If the contributions are not received on the policy anniversary the policy
becomes paid up. However the term Assurance Cover will be provided to the members
by way of Auto Cover for a period of five years from the policy anniversary for which
the contributions have not been received from the policyholder. The Term Assurance
cover equal to Future Service Gratuity or number of months salary subject to a minimum
of one month salary of members as opted by the policyholder will be provided as Auto
Cover for which the mortality charges together with service tax if any, will be deducted
by cancelling appropriate number of units from the Unit Account . At the end of five
years from the policy anniversary for which the contributions have not been received
from the policyholder if the policy is still in paid up condition the policy shall be
compulsorily terminated.
2. FLEXIBILITY OF CONTRIBUTIONS: Contributions are payable on every policy
anniversary.

• Benefits Under The Scheme


• Gratuity Benefits to Members whenever payable as per Rules of the Scheme shall be paid to the
Policyholder by debiting the requisite no of units to the Policyholder’s Unit Account at NAV
applicable at that time.
• In case of death of member, life insurance cover as opted for by Policyholder will also be paid
by the Corporation.

30
Group Insurance Schemes

• The policy can be surrendered at any time. The benefit available on surrender of the policy will
be the value of total number of units held in the Policyholder’s Unit Account at the time of
surrender.
At all times the Policyholder’s unit account should be sufficient to cover the relevant charges and
benefits payable at such point of time, subject to a minimum balance of Rs. Five lacs in the
Policyholder’s Unit Account. In case the Policyholder’s Unit Account falls below this limit, the
policy shall compulsorily be terminated and the balance amount in the Policyholder’s Unit
Account will be refunded to the Policyholder.
• How to install the Scheme :
• Pass a resolution for creation of Gratuity Trust Fund.
• Execute the Trust Deed and appoint Trustees for administering the scheme. If Trust already
exists, execute a Deed of Variation.
• Apply to Commissioner of Income Tax for approval under Part C of the Fourth Schedule of the
Income Tax Act 1961
• Forward to LIC, Master Proposal signed by Trustees, employee data , copies of Trust Deed,
Scheme Rules and cheque for payment of premium
• Open a bank account in favour of the Trust.

• Risks Borne By The Policyholder


The Value of the units is subject to market and other risks and there can be no assurance that the
objectives of any of the above funds will be achieved. The value of units within each Fund can
go up or down depending on the different factors affecting the capital markets and may also be
affected by changes in the general level of interest rates and other economic factors. All benefits
under the policy are also subject to the Tax Laws and other financial enactments as they exist
from time to time.

31
Group Insurance Schemes

Number of schemes & the sum assured by LIC

Year No. of Schemes Sum Assured/Annuity Per Annum


Group Insurance (incl.Social
Security)
2008-2009 20,771 75,256.56
2007-2008 22,113 67,784.93
2006-2007 20,434 1,52,864.62
Group Superannuation
2008-2009 540 347.52
2007-2008 445 279.04
2006-2007 263 212.09
Linked Business G Plus*
2008-2009 24 62.21

32
Group Insurance Schemes

2007-2008 46 138.38
2006-2007 20 97.68
*Scheme introduced during 2006-07

25000

20000

15000
Group Insu (incl. So. Sec)
Group Superannuation
10000
Linked Business G Plus

5000

0
2006-07 2007-08 2008-09

Number of schemes offered by LIC for the period of 2006-2009

160000
140000
120000
100000
Group Insu. ( incl. Soc. Sec)
80000
Group Superannuation
60000
Linked Busi. G Plus
40000
20000
0
2006-07 2007-08 2008-09

The Sum assured/ annuity per annum for the period of 2006-2009

33
Group Insurance Schemes

 Social Security Schemes

 JanaShree Bima Yojana (JBY)

• Features

The objective of the scheme is to provide life insurance protection to the rural and urban poor
persons below poverty line and marginally above the poverty line.

• Eligibility:
A person who is
*Aged between 18 and 59 years.
*Below or marginally above poverty line
*A member of any of the approved vocation/occupation groups
• Nodal Agency:
A State Government Department which is concerned with the welfare of any such
vocation/occupation group, a Welfare Fund/ Society, Village Panchayat,NGO,Self-Help
Group,etc.
• Minimum Membership Size:
Twenty Five.

• Benefit enhanced w.e.f. 15.08.2006


In the events of
*Death (other than by accident) of the member, an amount of Rs.30,000/- is payable.
*death/total permanent disability, due to accident, an amount of Rs.75,000/-is payable.
*Permanent partial disability, due to accident, an amount of Rs.37,500/- is payable.
• Premium :
*The premium under the scheme is Rs.200/-per annum per member. *50% of the
premium i.e. Rs.100/- will be contributed by the member and/or Nodal Agency/State
Government.

34
Group Insurance Schemes

*Balance 50% will be borne by the Social Security Fund.

• Approved Vocation & Occupational Groups:

A) The group that can be covered are like workers in -


(i) Foodstuffs like khandsari
(ii) Textile
(iii) Manufacture of wood products
(iv) Manufacture of paper products
(v) Manufacture of leather products
(vi) Printing
(vii) Rubber and coal products
(viii) Chemical products like candle manufacture
(ix) Mineral products like earthern toys manufacture
(x) Fire cracker's workers
(xi)Construction workers
(xii)Other related cottage industries to be identified by Nodal
Agencies and other groups as identified by the Nodal Agency and approved by LIC.

B) The occupational groups are :


Beedi workers, Brick Kiln Workers(Jalandhar),Carpenters, Cobblers, Fisherman, Hamals,
Handicraft Artisans, Handloom Weavers, Handloom and Khadi Weavers, Lady Tailors, Leather
and Tannery Workers, Papad Workers attached to 'SEWA', Physically Handicapped self-
Employed Persons, Primary Milk Producers, Rickshaw Pullers/ Auto Drivers, Safai
Karmacharis, Salt Growers, Tendu Leaf Collectors, Scheme for the Urban Poor, Forest Workers,
Sericulture, Toddy Tappers, Powerloom Workers, Scheme for Women in Remote Rural Hilly
Areas.

 Shiksha Sahayog Yojana

35
Group Insurance Schemes

This is a scholarship scheme launched on 31.12.2001 for the benefit of children of members of
Janashree Bima Yojana.

• Eligibility:
Students studying in ix to xii standards, whose parents are covered under Janashree Bima
Yojana.If a student fails and is detained in the same standard, he will not be eligible for
scholarship for the next year in the same standard.

• Benefit:
Scholarship of Rs 300/- per quarter per child will be paid for maximum period of 4 years.
The benefit is restricted to two children per member(family) only.

• Premium:
No premium is charged for the scholarship

• How To Claim Scholarship:


The Nodal Agency will identify the students. The member of Janashree Bima Yojana
whose child is eligible for scholarship has to fill up an application form (available with
Nodal Agency) and submit to the Nodal Agency. The applications duly filled up and
certified will be sent along with the list of the beneficiary students by the Nodal Agency
to the concerned LIC, P&GS Unit for disbursement of scholarship/s.The scholarship/s
will be disbursed to the beneficiary students through the concerned Nodal Agency.

As only a limited number of beneficiaries will be provided scholarship under the scheme,
the selection for eligible students will be made on the basis of poorest of the poor.

The scheme will be administered through Pension and Group Schemes Department of
LIC of India.

36
Group Insurance Schemes

 Aam Admi Bima Yojana

• Features

In a rural landless household, when everyday living is a struggle, it is difficult to face life with a
smile. And it becomes even more difficult when the future of your family is uncertain.

AAM ADMI BIMA YOJANA, a prestigious scheme of the Central and State / Union Territory
Governments and administered by LIC brings a ray of hope and smile to these households.

• Nodal Agency
The Nodal Agency shall mean the State / Union Territory Government appointed to
administer the scheme.
The Nodal Agency shall act for and on behalf of the insured members in all matters
relating to the Scheme.

• Identification Of Beneficiaries
The State / Union Territory Government in consultation with the Panchayats will identify
the persons to be covered under the scheme. All the members will be provided with an
identity card by LIC with an unique identity number.

• Eligibility

The member should be aged between 18 and 59 years


The member should be the head of the family or one earning member in the family of
rural landless household.

• Age Proof

37
Group Insurance Schemes

• Ration Card
• Extract from Birth Certificate
• Extract from School Certificate.
• Voters list
• Identity Card

In case of doubt, a certificate from Primary Health Centre can be accepted as authentic proof of
age.

• Benefits

In the event of death of a member prior to the terminal date, the Sum Assured of Rs.30,000/-
will become payable to the nominee.
Accident Benefit: In the event of death by accident or Total / Partial Permanent Disability due to
accident, the following benefits shall become payable:

a) on death due to accident Rs.75,000/-


b) Permanent total disability due to accident Rs.75,000/-
c) Loss of one eye or one limb in an accident Rs.37,500/-

A free add-on scholarship benefit for the children of the members of AABY is provided under
the scheme. A scholarship at the rate of Rs. 100/- per month will be given to maximum two
children studying between 9th to I2th Standard. This scholarship, however, is payable half yearly
- on 1st July and on Ist January, each year.

• Premium

• The premium under the scheme shall be Rs.200/- out of which 50% shall be subsidized
from the Fund created for this purpose by the Central Government and the remaining
50% shall be contributed by the State Government.
38
Group Insurance Schemes

• The premium shall be payable in yearly mode and no relaxation of mode of payment will
be allowed.
• Experience rating adjustment will be allowed after 3 years based on claim experience, if
the group is of 2,000 or more members. Even if the group size is small and the claim
experience is adverse, LIC may review the rates.

• Claim Procedure

Claim procedure is simple. The beneficiary will be required to furnish the original death
certificate and the identity card issued by LIC to the Nodal Agency who will arrange to
forward the same along with the claim form to the nearest P&GS Unit in the cities where
P&GS Units are located. In the cities where the P&GS Units are not located, the claim
should be submitted to the nearest branch office of LIC. LIC will settle the claim by
sending Account Payee cheque directly to the beneficiary or by any other mode of
payment as decided by LIC. In case of death by accident, police inquest report, FIR, post
mortem report will also be required to be submitted.

In case of disability claim, documentary evidence of the accident as well as medical certificate
from a Government Civil Surgeon or qualified Government Orthopaedician certifying permanent
total / partial disability should be submitted.
Death/total permanent disability due to accident shall mean death / disability occurring within
I80 days of the happening of bodily injury resulting solely and directly from accident caused by
violent, external and visible means, independently of any other cause.

• Procedure To Claim The Scholarship

• The Nodal Agency will identify the students. The member whose child is eligible for
scholarship shall fill up an application form and submit it to the Nodal Agency. The
Nodal Agency in turn will submit the list of beneficiary students to the concerned P&GS

39
Group Insurance Schemes

Unit with full details such as name of the student, name of the school, class, member’s
name, master policy number and membership number.
• Every half year, LIC will send the Account Payee Cheque in the name of the Nodal
Agency along with list of beneficiary students. The Nodal Agency will pass on the
scholarship to the eligible students. The Nodal Agency shall submit a utilization
certificate before claiming the scholarships for the next half year.
• Any other mode of payment of scholarship may be decided by LIC/Government.

40
Group Insurance Schemes

References

WWW.LICINDIA.IN

WWW.IRDAINDIA.ORG

WWW.GOOGLE.COM

41